Australia’s NationalScience Agency Financial and socio-economicviability of irrigated agriculturaldevelopment in theSouthern Gulfcatchments A technical report from the CSIROSouthern GulfWater ResourceAssessmentfor theNational Water Grid AnthonyWebster1,Diane Jarvis2,Shokhrukh Jalilov1,Seonaid Philip1,Yvette Oliver1,Ian Watson1, Tiemen Rhebergen1, Caroline Bruce1, Di Prestwidge1,StephenMcFallan1,MattCurnock1andChrisStokes1 1CSIRO,2James Cook University A group of logos with a sun and waves Description automatically generated ISBN 978-1-4863-2079-0 (print) ISBN 978-1-4863-2080-6 (online) Citation Webster A, Jarvis D, Jalilov S, Philip S, Oliver Y, Watson I, Rhebergen T, Bruce C, Prestwidge D, McFallan S, Curnock M and Stokes C (2024) Financial and socio-economic viability of irrigated agricultural development in the Southern Gulf catchments. A technical report from the CSIRO Southern Gulf Water Resource Assessment for the National Water Grid. CSIRO, Australia. Copyright © Commonwealth Scientific and Industrial Research Organisation 2024. To the extent permitted by law, all rights are reserved and no part of this publication covered by copyright may be reproduced or copied in any form or by any means except with the written permission of CSIRO. Important disclaimer CSIRO advises that the information contained in this publication comprises general statements based on scientific research. The reader is advised and needs to be aware that such information may be incomplete or unable to be used in any specific situation. No reliance or actions must therefore be made on that information without seeking prior expert professional, scientific and technical advice. To the extent permitted by law, CSIRO (including its employees and consultants) excludes all liability to any person for any consequences, including but not limited to all losses, damages, costs, expenses and any other compensation, arising directly or indirectly from using this publication (in part or in whole) and any information or material contained in it. CSIRO is committed to providing web accessible content wherever possible. If you are having difficulties with accessing this document please contact Email CSIRO Enquiries . CSIRO Southern Gulf Water Resource Assessment acknowledgements This report was funded through the National Water Grid’s Science Program, which sits within the Australian Government’s Department of Climate Change, Energy, the Environment and Water. Aspects of the Assessment have been undertaken in conjunction with the Northern Territory and Queensland governments. The Assessment was guided by two committees: i. The Governance Committee: CRC for Northern Australia/James Cook University; CSIRO; National Water Grid (Department of Climate Change, Energy, the Environment and Water); Northern Land Council; NT Department of Environment, Parks and Water Security; NT Department of Industry, Tourism and Trade; Office of Northern Australia; Queensland Department of Agriculture and Fisheries; Queensland Department of Regional Development, Manufacturing and Water ii. The Southern Gulf catchments Steering Committee: Amateur Fishermen’s Association of the NT; Austral Fisheries; Burketown Shire; Carpentaria Land Council Aboriginal Corporation; Health and Wellbeing Queensland; National Water Grid (Department of Climate Change, Energy, the Environment and Water); Northern Prawn Fisheries; Queensland Department of Agriculture and Fisheries; NT Department of Environment, Parks and Water Security; NT Department of Industry, Tourism and Trade; Office of Northern Australia; Queensland Department of Regional Development, Manufacturing and Water; Southern Gulf NRM Responsibility for the Assessment’s content lies with CSIRO. The Assessment’s committees did not have an opportunity to review the Assessment results or outputs prior to their release. Numerous people were generous in assisting with information on cropping input prices and agronomy used in the crop gross margin analyses: Chris Howie (Bindaroo Pastures), Don Telfer (DPIRD, WA), Frank Miller (African Mahogany Australia), Vin Lange (Centrefarm), Alex Lindsay (Forsite Forestry), Scott Fedrici (Quintis), George Revell (Ag Econ), Arthur Cameron (NT Ag), Muhammad Sohail Mazhar (NT Ag), David McNeil (DPIRD, WA), Sarah Ryan (Tiwiplantations), Alireza Houshmandfar (NT DITT), NT Farmers. Steve McFallan (CSIRO) provided estimates of freight costs from the TraNSIT model. Acknowledgement is made to the Queensland Government who are the custodians for the GRASP code and provide ongoing model testing and improvement. GRASP reference: Rickert KG, Stuth JW and McKeon GM (2000) Modelling pasture and animal production. In: Mannetje L’t and Jones RM (eds) Field and laboratory methods for grassland and animal production research. CABI Publishing, New York, 29–66. This report was improved based on helpful review comments from Dr Don Gaydon (CSIRO), Dr Ian Biggs, Paul Burke (NACS) and Daniel Granger (CSIRO). Acknowledgement of Country CSIRO acknowledges the Traditional Owners of the lands, seas and waters, of the area that we live and work on across Australia. We acknowledge their continuing connection to their culture and pay our respects to their Elders past and present. Photo: Loading hay bales in northern Australia. Source: CSIRO – Nathan Dyer Director’s foreword Sustainable development and regional economic prosperity are priorities for the Australian, Queensland and Northern Territory (NT) governments. However, more comprehensive information on land and water resources across northern Australia is required to complement local information held by Indigenous Peoples and other landholders. Knowledge of the scale, nature, location and distribution of likely environmental, social, cultural and economic opportunities and the risks of any proposed developments is critical to sustainable development. Especially where resource use is contested, this knowledge informs the consultation and planning that underpin the resource security required to unlock investment, while at the same time protecting the environment and cultural values. In 2021, the Australian Government commissioned CSIRO to complete the Southern Gulf Water Resource Assessment. In response, CSIRO accessed expertise and collaborations from across Australia to generate data and provide insight to support consideration of the use of land and water resources in the Southern Gulf catchments. The Assessment focuses mainly on the potential for agricultural development, and the opportunities and constraints that development could experience. It also considers climate change impacts and a range of future development pathways without being prescriptive of what they might be. The detailed information provided on land and water resources, their potential uses and the consequences of those uses are carefully designed to be relevant to a wide range of regional-scale planning considerations by Indigenous Peoples, landholders, citizens, investors, local government, and the Australian, Queensland and NT governments. By fostering shared understanding of the opportunities and the risks among this wide array of stakeholders and decision makers, better informed conversations about future options will be possible. Importantly, the Assessment does not recommend one development over another, nor assume any particular development pathway, nor even assume that water resource development will occur. It provides a range of possibilities and the information required to interpret them (including risks that may attend any opportunities), consistent with regional values and aspirations. All data and reports produced by the Assessment will be publicly available. Chris Chilcott Project Director C:\Users\bru119\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Word\C_Chilcott_high.jpg The Southern Gulf Water Resource Assessment Team Project Director Chris Chilcott Project Leaders Cuan Petheram, Ian Watson Project Support Caroline Bruce, Seonaid Philip Communications Emily Brown, Chanel Koeleman, Jo Ashley, Nathan Dyer Activities Agriculture and socio- economics Tony Webster, Caroline Bruce, Kaylene Camuti1, Matt Curnock, Jenny Hayward, Simon Irvin, Shokhrukh Jalilov, Diane Jarvis1, Adam Liedloff, Stephen McFallan, Yvette Oliver, Di Prestwidge2, Tiemen Rhebergen, Robert Speed3, Chris Stokes, Thomas Vanderbyl3, John Virtue4 Climate David McJannet, Lynn Seo Ecology Danial Stratford, Rik Buckworth, Pascal Castellazzi, Bayley Costin, Roy Aijun Deng, Ruan Gannon, Steve Gao, Sophie Gilbey, Rob Kenyon, Shelly Lachish, Simon Linke, Heather McGinness, Linda Merrin, Katie Motson5, Rocio Ponce Reyes, Jodie Pritchard, Nathan Waltham5 Groundwater hydrology Andrew R. Taylor, Karen Barry, Russell Crosbie, Margaux Dupuy, Geoff Hodgson, Anthony Knapton6, Stacey Priestley, Matthias Raiber Indigenous water values, rights, interests and development goals Pethie Lyons, Marcus Barber, Peta Braedon, Petina Pert Land suitability Ian Watson, Jenet Austin, Bart Edmeades7, Linda Gregory, Ben Harms10, Jason Hill7, Jeremy Manders10, Gordon McLachlan, Seonaid Philip, Ross Searle, Uta Stockmann, Evan Thomas10, Mark Thomas, Francis Wait7, Peter Zund Surface water hydrology Justin Hughes, Matt Gibbs, Fazlul Karim, Julien Lerat, Steve Marvanek, Cherry Mateo, Catherine Ticehurst, Biao Wang Surface water storage Cuan Petheram, Giulio Altamura8, Fred Baynes9, Jamie Campbell11, Lachlan Cherry11, Kev Devlin4, Nick Hombsch8, Peter Hyde8, Lee Rogers, Ang Yang Note: Assessment team as at September, 2024. All contributors are affiliated with CSIRO unless indicated otherwise. Activity Leaders are underlined. 1James Cook University; 2DBP Consulting; 3Badu Advisory Pty Ltd; 4Independent contractor; 5 Centre for Tropical Water and Aquatic Ecosystem Research. James Cook University; 6CloudGMS; 7NT Department of Environment, Parks and Water Security; 8Rider Levett Bucknall; 9Baynes Geologic; 10QG Department of Environment, Science and Innovation; 11Entura Shortened forms SHORT FORM FULL FORM ABARES Australian Bureau of Agricultural and Resource Economics and Sciences ABS Australian Bureau of Statistics AE adult equivalent ANCOLD Australian National Committee on Large Dams APSIM Agricultural Production Systems sIMulator CBA cost–benefit analysis CBD central business district BCR benefit–cost ratio (present value of benefits/present value of costs for a project) CCS commercial cane sugar (percentage of extractable raw sugar in harvested cane) CGE computable general equilibrium (model) CLEM Crop Livestock Enterprise Model CO2CRC a Cooperative Research Centre (CRC) investigating carbon capture and storage technologies CPI consumer price index CSIRO Commonwealth Scientific and Industrial Research Organisation DCF discounted cashflow DIDO drive-in drive-out (applied to type of workforce) DS dry season EBITDA earnings before interest, taxes, depreciation and amortisation EIS environmental impact statement EPRI Electric Power Research Institute FIFO fly-in fly-out (applied to type of workforce) FTE full-time equivalent GABORA Great Artesian Basin and Other Regional Aquifers GCM global climate model GCM-PS global climate model pattern scaled GDP gross domestic product GFA gross floor area GM gross margin GVAP gross value of agricultural production (an ABARES statistic) GVIAP gross value of irrigated agricultural production (an ABARES statistic) GVP gross value of production HSD Health Service District HV high voltage (electricity transmission lines) SHORT FORM FULL FORM IEO Index of Education and Occupation IER Index of Economic Resources ILUA Indigenous land use agreement I–O input–output IRR internal rate of return KP Kensington Pride (mango variety) LCOE least cost of energy LGA local government area NABSA Northern Australia Beef Systems Analyser NEM National Electricity Market NPF Northern Prawn Fishery NPV net present value NSW New South Wales NT Northern Territory NWPS North West Power System O&M operation and maintenance (type of recurring cost) PAW plant available water PAWC plant available water capacity PCR post-completion review PE potential evaporation PHN primary health network PVR plant variety rights QDAF Queensland Department of Agriculture and Fisheries Qld Queensland RH relative humidity SA South Australia SA1 to SA4 ABS Statistical Area (spatial boundary for data collection), number indicates hierarchy level SA1s are the smallest unit for general release of Census data (and are aggregated into larger units) SEIFA Socio-Economic Indexes for Areas (published by ABS) SGG soil generic group TERN The Enormous Regional Model TDH total dynamic head (1 m TDH = 9.8 kPa) TraNSIT Transport Network Strategic Investment Tool VPD vapour pressure deficit WA Western Australia WACC weighted average cost of capital WS wet season Units UNITS DESCRIPTION $ Australian dollars, at constant December 2023 value °C degree Celsius cm centimetre AE animal equivalent (cattle) bale bale of processed cotton lint (227 kg) FTE full-time equivalent g gram GL gigalitre GWh gigawatt hour ha hectare (= 10,000 m2) kg kilogram km kilometre kPa kilopascal kV kilovolt kVA 1000 volt amps kW kilowatt L litre m metre Ma million years (ago) mm millimetre MJ megajoule ML megalitre mm millimetre Mt megatonne (1 million tonnes) MVA megavolt amp (1 MVA = 1 MW) MW megawatt MWh megawatt hour ppm parts per million t metric tonne y year Preface Sustainable development and regional economic prosperity are priorities for the Australian, NT and Queensland governments. In the Queensland Water Strategy, for example, the Queensland Government (2023a) looks to enable regional economic prosperity through a vision that states ‘Sustainable and secure water resources are central to Queensland’s economic transformation and the legacy we pass on to future generations.’ Acknowledging the need for continued research, the NT Government (2023) announced a Territory Water Plan priority action to accelerate the existing water science program ‘to support best practice water resource management and sustainable development.’ Governments are actively seeking to diversify regional economies, considering a range of factors, including Australia’s energy transformation. The Queensland Government’s economic diversification strategy for North West Queensland (Department of State Development, Manufacturing, Infrastructure and Planning, 2019) includes mining and mineral processing; beef cattle production, cropping and commercial fishing; tourism with an outback focus; and small business, supply chains and emerging industry sectors. In its 2024–25 Budget, the Australian Government announced large investment in renewable hydrogen, low-carbon liquid fuels, critical minerals processing and clean energy processing (Budget Strategy and Outlook, 2024). This includes investing in regions that have ‘traditionally powered Australia’ – as the North West Minerals Province, situated mostly within the Southern Gulf catchments, has done. For very remote areas like the Southern Gulf catchments (Preface Figure 1-1), the land, water and other environmental resources or assets will be key in determining how sustainable regional development might occur. Primary questions in any consideration of sustainable regional development relate to the nature and the scale of opportunities, and their risks. How people perceive those risks is critical, especially in the context of areas such as the Southern Gulf catchments, where approximately 27% of the population is Indigenous (compared to 3.2% for Australia as a whole) and where many Indigenous Peoples still live on the same lands they have inhabited for tens of thousands of years. About 12% of the Southern Gulf catchments are owned by Indigenous Peoples as inalienable freehold. Access to reliable information about resources enables informed discussion and good decision making. Such information includes the amount and type of a resource or asset, where it is found (including in relation to complementary resources), what commercial uses it might have, how the resource changes within a year and across years, the underlying socio-economic context and the possible impacts of development. Most of northern Australia’s land and water resources have not been mapped in sufficient detail to provide the level of information required for reliable resource allocation, to mitigate investment or environmental risks, or to build policy settings that can support good judgments. The Southern Gulf Water Resource Assessment aims to partly address this gap by providing data to better inform decisions on private investment and government expenditure, to account for intersections between existing and potential resource users, and to ensure that net development benefits are maximised. Preface Figure 1-1 Map of Australia showing Assessment area (Southern Gulf catchments) and other recent CSIRO Assessments FGARA = Flinders and Gilbert Agricultural Resource Assessment; NAWRA = Northern Australia Water Resource Assessment. The Assessment differs somewhat from many resource assessments in that it considers a wide range of resources or assets, rather than being a single mapping exercises of, say, soils. It provides a lot of contextual information about the socio-economic profile of the catchments, and the economic possibilities and environmental impacts of development. Further, it considers many of the different resource and asset types in an integrated way, rather than separately. The Assessment has agricultural developments as its primary focus, but it also considers opportunities for and intersections between other types of water-dependent development. For example, the Assessment explores the nature, scale, location and impacts of developments relating to industrial, urban and aquaculture development, in relevant locations. The outcome of no change in land use or water resource development is also valid. The Assessment was designed to inform consideration of development, not to enable any particular development to occur. As such, the Assessment informs – but does not seek to replace – existing planning, regulatory or approval processes. Importantly, the Assessment does not assume a given policy or regulatory environment. Policy and regulations can change, so this flexibility enables the results to be applied to the widest range of uses for the longest possible time frame. It was not the intention of – and nor was it possible for – the Assessment to generate new information on all topics related to water and irrigation development in northern Australia. Topics For more information on this figure please contact CSIRO on enquiries@csiro.au not directly examined in the Assessment are discussed with reference to and in the context of the existing literature. CSIRO has strong organisational commitments to Indigenous reconciliation and to conducting ethical research with the free, prior and informed consent of human participants. The Assessment allocated significant time to consulting with Indigenous representative organisations and Traditional Owner groups from the catchments to aid their understanding and potential engagement with its requirements. The Assessment did not conduct significant fieldwork without the consent of Traditional Owners. CSIRO met the requirement to create new scientific knowledge about the catchments (e.g. on land suitability) by synthesising new material from existing information, complemented by remotely sensed data and numerical modelling. Functionally, the Assessment adopted an activities-based approach (reflected in the content and structure of the outputs and products), comprising activity groups, each contributing its part to create a cohesive picture of regional development opportunities, costs and benefits, but also risks. Preface Figure 1-2 illustrates the high-level links between the activities and the general flow of information in the Assessment. Preface Figure 1-2 Schematic of the high-level linkages between the eight activity groups and the general flow of information in the Assessment Assessment reporting structure Development opportunities and their impacts are frequently highly interdependent and, consequently, so is the research undertaken through this Assessment. While each report may be read as a stand-alone document, the suite of reports for each Assessment most reliably informs discussion and decisions concerning regional development when read as a whole. For more information on this figure please contact CSIRO on enquiries@csiro.au The Assessment has produced a series of cascading reports and information products: • Technical reports present scientific work with sufficient detail for technical and scientific experts to reproduce the work. Each of the activities (Preface Figure 1-2) has one or more corresponding technical reports. • A catchment report, which synthesises key material from the technical reports, providing well- informed (but not necessarily scientifically trained) users with the information required to inform decisions about the opportunities, costs and benefits, but also risks, associated with irrigated agriculture and other development options. • A summary report provides a shorter summary and narrative for a general public audience in plain English. • A summary fact sheet provides key findings for a general public audience in the shortest possible format. The Assessment has also developed online information products to enable users to better access information that is not readily available in print format. All of these reports, information tools and data products are available online at https://www.csiro.au/southerngulf. The webpages give users access to a communications suite including fact sheets, multimedia content, FAQs, reports and links to related sites, particularly about other research in northern Australia. Executive summary The purpose of this report is to provide information on the costs, risks and benefits of new irrigated development in the catchment of the Southern Gulf rivers of the NT and Queensland, at farm to scheme and regional scales, and supply chains beyond. The overall conclusion is that large public dams would be marginal, but local extraction and storage of water on-farm, suitably sited, could provide good prospects for viable new enterprises. Farming options for the Southern Gulf catchments • Amongst the range of irrigated cropping options suited to the Southern Gulf catchments environments, those that are most likely to be profitable (where development costs can be kept low enough) are annual horticulture, cotton and forages. Most broadacre cropping is best suited to dry-season planting (late March to June), but this requires more irrigation. Wet-season planting (December to early March) would be possible on well-drained soils, particularly for annual horticulture (targeting harvests for winter gaps in supply in southern markets). The amount of irrigation required depends on a number of factors, but as an example, cotton planted at the end of the wet season would need about 5 to 6 ML/ha while the perennial forage crop Rhodes grass would require up to 22 ML/ha each year. • Sequential cropping systems (more than one crop per year in the same field) present opportunities for generating additional net revenue from the same capital investment. There are many potential cropping sequences that show agronomic potential for matching back-to-back crop requirements with the growing conditions of the Southern Gulf catchments, particularly on well-draining loamy soils (like those in the north-western Doomadgee Plain). However, these farming systems would need to be developed and proven locally, and the challenges involved should not be underestimated. • Extensive areas of soils are suited to sequential cropping systems, although trafficability constraints on poorer drained finer-textured clay soils would make scheduling crop sequences in the same year more difficult, and so would restrict the choice of crops to those with shorter growing seasons. • The farm-scale performance of cropping systems will be determined by: (i) finding markets and supply chains that can provide a sufficient price, scale and reliability of demand; (ii) the skill of farmers in managing the operational and financial complexity of adapting crop mixes and production systems to the environments of the Southern Gulf catchments; (iii) the nature of water resources in terms of their costs to develop, the volume and reliability of supply, and the timing of when water is available relative to optimal planting windows; and (iv) the nature of the soil resources in terms of their scale and distribution, proximity to water sources and supply chains, farming constraints, the crops they can support with viable yields, and costs to develop. • There are natural synergies in growing irrigated crops or forages to integrate with existing beef enterprises in the Southern Gulf catchments. Annual beef revenue would need to be increased by the order of $2000 to $3000/ha of irrigated forages to provide an acceptable return on the initial capital costs of development. Few options were able to generate such returns, with Rhodes grass being the most likely forage to be viable (but only under scenarios where development costs could be kept low and beef prices remained at current (2023) high levels). Economic considerations beyond the farm gate • A review of recent public dams built in Australia highlighted some areas where cost–benefit analyses (CBAs) for water infrastructure projects could be improved, particularly regarding more realistic forecasting of demand for water. This report provides information for benchmarking a range of assumptions commonly used in such CBAs, including demand forecasting, that can be used to check when proposals for new dams are being unrealistically optimistic (or pessimistic). • Financial analyses indicated that large dams in the Southern Gulf catchments are unlikely to be viable (if governments required full cost recovery at an Infrastructure Australia (2021b) based 7% per annum internal rate of return (IRR) and provided no assistance). Irrigators could afford to contribute at most $20,000/ha towards the cost of new off-farm water infrastructure (about half, before accounting for risks), whereas the most cost-effective potential large dam development would likely cost nearly $80,000/ha of new irrigated farmland (e.g. capital cost of $820 million to build a dam and supporting infrastructure that could irrigate about 10,000 ha). • Dams could be marginally viable if public investors accepted a 3% IRR or partial contributions to water infrastructure costs similar to established irrigation schemes in other parts of Australia. • On-farm water sources provide better prospects and, where sufficiently cheap water development opportunities can be found, these could likely support viable broadacre farms and horticulture with low development costs. Horticulture with high development costs (like fruit orchards with modern packing facilities) in the Southern Gulf catchments would be more challenging unless farm financial performance could be boosted by finding niche opportunities for premium produce prices, or savings in production and marketing costs. • For broadacre crops, gross margins of the order of $4000 per hectare per year (before accounting for the costs of water or risks) are required to provide a sufficient return on investment. Those crops likely to achieve such a return (under current conditions, in 2023) include Rhodes grass hay and wet-season cotton. In the case of cotton, a local processing facility (cotton gin) is required to minimise transport costs to market. • Horticultural gross margins would have to be higher (of the order of $7,000 to $11,000 per hectare per year) to provide an adequate return on the higher capital costs of developing this more intensive type of farming (relative to broadacre). Profitability of horticulture is extremely sensitive to prices received, so the locational advantage of supplying ‘out-of-season’ (winter) produce to southern markets is critical to viability. Wet-season planted annual horticultural row crops would be the most likely to achieve these returns in the Southern Gulf catchments. • Farm performance can be affected by a range of external risks, including water reliability, climate variability and price fluctuations, and the inherent risk of learning to adapt farming practices to new locations. Setbacks that occur early on after an irrigation scheme is established have the largest effect on scheme viability. There is a strong incentive to start any new irrigation development with well-proven crops and technologies, and to be thoroughly prepared for the anticipatable agronomic risks of establishing new farmland. Risks that cannot be avoided need to be managed, mitigated where possible, and accounted for in determining the realistic returns that may be expected from a farm/scheme and the capital buffers that would be required. • Any development of new irrigated agriculture and supporting infrastructure would have knock- on benefits to the regional economy beyond the direct economic growth from the new enterprises and construction. During the ongoing production phase of a new irrigation development, there could be an additional $0.32 to $0.82 million of indirect regional benefits for each million dollars of direct benefits from increased agricultural activity (gross farm revenue net of any payments for water), depending on the type of agricultural industry and associated spillover effects. Each net $100 million increase in agricultural activity could create about 175 to 300 jobs, depending on the agricultural industry and associated spillover effects. Identifying investment opportunities As market, regulatory, infrastructure and other conditions in the Southern Gulf catchments change from those prevailing at the time this report was written, investors/farmers would be expected to adapt and respond to these conditions in identifying investment opportunities. Ultimately, to establish and sustain new irrigated developments in the Southern Gulf catchments, investors will need to identify opportunities that simultaneously solve all three of the following questions: • Markets: Where is the investor going to sell their produce, what price will they receive and how are they going to set up the supply chains to get their products, at low-enough cost, from the Southern Gulf catchments to those who want to buy them? • Production systems: What is the investor going to grow and do they understand how this needs to be grown differently in tropical Australia (and the soils, water resources and climates of the environments of the Southern Gulf catchments specifically) to where they have gained their previous experience? • Competition: Why is it better to grow the chosen product(s) in tropical Australia, relative to alternative options of growing the same product elsewhere, or growing different products in the chosen location? There is a wide variety of potential investors in northern Australia agriculture, each of whom will come with different strengths regarding the above three criteria but will also likely have blind spots where they are not initially completely aware of the full scale of the challenges involved. Successful investments have typically been able to find comprehensively planned answers to all three of these questions, while failures have not. This Assessment (including companion reports) has focused primarily on ‘production system’ challenges by filling knowledge gaps on the land and water resources in the Southern Gulf catchments. This report evaluated the farming options that could be sustainably and profitably developed on that resource base, and it provides additional supporting information for overcoming the competitive disadvantages and market constraints for northern Australia. Widespread expansion of agriculture in the Southern Gulf catchments is unlikely to occur in the near term, except if cotton prices remain at historical highs and/or a cotton ginning facility is built locally. Small-scale opportunities will continue to emerge for integration of irrigated agriculture with local cattle operations, or those able to find niches for cost savings and suitable markets, and who have the capital and capacity to persist through the challenging establishment years. Contents Director’s foreword .......................................................................................................................... i The Southern Gulf Water Resource Assessment Team .................................................................. ii Shortened forms .............................................................................................................................iii Units ............................................................................................................................... v Preface ............................................................................................................................... vi Executive summary .......................................................................................................................... x Part I Background context 1 1 Introduction ........................................................................................................................ 2 1.1 Rationale and approach ........................................................................................ 2 1.2 Structure of this report .......................................................................................... 3 2 Socio-economic context ..................................................................................................... 6 2.1 Agricultural industries of Queensland ................................................................... 6 2.2 Market opportunities and challenges ................................................................. 24 2.3 Demography and economy of the Southern Gulf catchments ........................... 37 Part II Agricultural development options 71 3 Biophysical factors affecting agricultural performance ................................................... 72 3.1 Climate ................................................................................................................. 72 3.2 Soils and land suitability ...................................................................................... 80 3.3 Irrigation systems ................................................................................................ 88 3.4 Crop types ............................................................................................................ 92 3.5 Crop and forage management .......................................................................... 100 3.6 Cattle and beef production ............................................................................... 106 4 Approach for evaluating agricultural options ................................................................. 108 4.1 Multi-scale framework for evaluating agricultural viability .............................. 108 4.2 Crop yields and water use ................................................................................. 109 4.3 Greenfield crop gross margin tool ..................................................................... 115 4.4 Modelling the integration of forage and hay crops within existing beef cattle enterprises ...................................................................................................................... 118 5 Performance of agricultural development options ........................................................ 120 5.1 Principles of rainfed and irrigated cropping ...................................................... 120 5.2 Performance of irrigated crop options .............................................................. 125 5.3 Cropping systems .............................................................................................. 138 5.4 Integrating forages into livestock systems ........................................................ 144 Part III Economics 155 6 Lessons learned from recent Australian dam-building experiences .............................. 156 6.1 Introduction ....................................................................................................... 156 6.2 Methods and case study selection .................................................................... 158 6.3 Proposed and realised outcomes for each case study development ............... 160 6.4 Key lessons......................................................................................................... 166 7 New infrastructure demand and costs ........................................................................... 172 7.1 Introduction ....................................................................................................... 172 7.2 Agricultural growth and water demand trajectories ........................................ 173 7.3 Development costs for land and water resources ............................................ 176 7.4 Processing costs ................................................................................................. 180 7.5 Transport costs .................................................................................................. 182 7.6 Energy infrastructure costs ............................................................................... 186 7.7 Community infrastructure costs ........................................................................ 188 8 Financial viability of new irrigated development ........................................................... 190 8.1 Introduction ....................................................................................................... 190 8.2 Balancing scheme-scale costs and benefits ...................................................... 192 8.3 Price irrigators can afford to pay for a new water source ................................ 199 8.4 Financial targets required in order to cover costs of large, off-farm dams ...... 200 8.5 Financial targets required in order to cover costs of on-farm dams and bores 203 8.6 Risks associated with variability in farm performance ..................................... 205 8.7 Achieving financial viability in a new irrigation development .......................... 210 9 Regional economics ........................................................................................................ 212 9.1 Multiplier and input–output (I–O) approach .................................................... 212 9.2 Regional economic benefits .............................................................................. 220 Part IV Concluding comment 229 10 The ‘sweet spot’ for northern development .................................................................. 230 References ........................................................................................................................... 235 Part V Appendices 257 Figures Preface Figure 1-1 Map of Australia showing Assessment area (Southern Gulf catchments) and other recent CSIRO Assessments ................................................................................................... vii Preface Figure 1-2 Schematic of the high-level linkages between the eight activity groups and the general flow of information in the Assessment ..................................................................... viii Figure 1-1 Map of the Assessment area showing the Southern Gulf catchments and catchments from previous related assessments of land and water resources in northern Australia. This Assessment comprises four mainland river catchments (Settlement, Nicholson, Leichhardt and Morning Inlet) plus the larger of the Wellesley island groups ....................................................... 5 Figure 2-1 Trends in gross value of agricultural production for crops and livestock in Queensland (1984–2022) .................................................................................................................................... 7 Figure 2-2 Production of hay by regions of Queensland in 2021–22 (tonnes) ............................. 13 Figure 2-3 Changes in agricultural subsectors relative values (GVAP) in (a) Australia and (b) Queensland over 40 years (1981–2021) ....................................................................................... 18 Figure 2-4 Trend in horticultural crop production across Australian states and territories over 40 years (1981–2021) ........................................................................................................................ 18 Figure 2-5 Trends in Queensland’s live cattle by end use (2017–2023) ....................................... 22 Figure 2-6 Comparison of marketing costs, across three categories of agriculture, relative to gross value of agricultural production (GVAP) for (a) Australia and (b) Queensland (average 2011–12 to 2020–21) .................................................................................................................... 33 Figure 2-7 Adaptability of Australia’s exports of broadacre commodities, as demonstrated by year-to-year variations in export volumes and market mixes before and after the disruptions associated with the Covid pandemic ............................................................................................ 35 Figure 2-8 Farmers’ terms of trade in Australia for (a) input prices and (b) prices received for commodities.................................................................................................................................. 36 Figure 2-9 Boundaries of the Australian Bureau of Statistics (ABS) Statistical Area Level 2 (SA2) regions used for demographic data in this analysis and the Tropical North Queensland tourism region ............................................................................................................................................ 40 Figure 2-10 Land use classification for the Southern Gulf catchments ........................................ 44 Figure 2-11 Regions in the Northern Prawn Fishery and the North West Minerals Province ..... 47 Figure 2-12 Local government areas and the Tropical North Queensland tourism region that statistics on tourism visitation are extracted from ....................................................................... 51 Figure 2-13 Road rankings and conditions in the vicinity of the Southern Gulf catchments ....... 56 Figure 2-14 Roads accessible to Type 2 vehicles in the vicinity of the Southern Gulf catchments: minor roads are not classified ....................................................................................................... 57 Figure 2-15 Common configurations of heavy freight vehicles used for transporting agricultural goods in Australia .......................................................................................................................... 58 Figure 2-16 Mean speed achieved for freight vehicles on roads in the vicinity of the Southern Gulf catchments’ ........................................................................................................................... 59 Figure 2-17 Annual amounts of trucking in the Southern Gulf catchments and the locations of pastoral properties. Inset maps shows locations of ports ............................................................ 62 Figure 2-18 Electricity generation and transmission network and pipelines in the Southern Gulf catchments .................................................................................................................................... 64 Figure 2-19 Location, type and volume of annual licensed surface water and groundwater entitlements of the Southern Gulf catchments ............................................................................ 67 Figure 3-1 Long-term fortnightly climate variation in (a) rainfall, (b) maximum and (c) minimum temperatures for the historical climate (1890 to 2015) at Gregory ............................................. 73 Figure 3-2 Long-term fortnightly climate variation in (a) solar radiation, (b) relative humidity (RH) and (c) vapour pressure deficit (VPD) under the historical climate (1890 to 2015) at Gregory.......................................................................................................................................... 74 Figure 3-3 Historical potential evaporation (PE) in the Southern Gulf catchments at Gregory for (a) monthly PE (range is the 20th to 80th percentile monthly PE) and (b) time series of annual PE (line is the 10-year running mean) ........................................................................................... 76 Figure 3-4 Monthly mean daily (a) solar radiation and (b) vapour pressure deficit for four locations in the Southern Gulf catchments (Westmoreland, Kamilaroi, Gregory and Gallipoli: latitude 17.3–19°S) and Griffith (subtropical: latitude 34.3°S) ..................................................... 77 Figure 3-5 Monthly mean daily (a) maximum and (b) minimum daily temperatures for four locations in the Southern Gulf catchments (Westmoreland, Kamilaroi, Gregory and Gallipoli: latitude 17.3–19°S) and Griffith (subtropical: latitude 34.3°S) ..................................................... 77 Figure 3-6 Mean annual number of tropical cyclones in Australian for (a) El Niño years and (b) La Niña years ...................................................................................................................................... 79 Figure 3-7 The soil generic groups (SGGs) of the Southern Gulf catchments produced by digital soil mapping .................................................................................................................................. 81 Figure 3-8 Agricultural versatility index map for the Southern Gulf catchments......................... 86 Figure 3-9 Annual cropping calendar for cropping options in the Southern Gulf catchments .. 103 Figure 3-10 Soil wetness indices that indicate when seasonal trafficability constraints are likely to occur on sands, Kandosols (loamy sands) and Vertosols (high clay) with a Gregory climate for two thresholds (a) 80% and (b) 70% of the maximum plant available water capacity .............. 104 Figure 4-1 Overview of multi-scale approach for evaluating the viability of agricultural development options .................................................................................................................. 108 Figure 4-2 Climate comparisons of Southern Gulf catchments climate sites versus established irrigation areas at Kununurra (WA) and Mareeba (Queensland) ............................................... 111 Figure 4-3 Farm gross margin tool used for consistent comparative analysis of different greenfield farming options ......................................................................................................... 116 Figure 5-1 Influence of planting date on rainfed grain sorghum yield at Gregory for (a) Kandosol and (b) Vertosol .......................................................................................................................... 122 Figure 5-2 Influence of available irrigation water on grain sorghum yields for planting dates (a) on 1 February and (b) 1 August, for a Vertosol with a Gregory climate ..................................... 124 Figure 5-3 Fluctuations in seedless watermelon prices at Melbourne wholesale markets from April 2020 to February 2023 ....................................................................................................... 133 Figure 5-4 Probability of exceedance graphs for (a) simulated irrigation requirement (mm), (b) irrigated grain yield (t/ha) and (c) non-irrigated grain yield (t/ha) for a grain sorghum crop grown under current climate conditions and for both a drier and wetter future climate scenario on a Vertosol at Gregory in the Southern Gulf catchments ....................................................... 137 Figure 5-5 Mean liveweights for each option for male animals born at the end of November 152 Figure 6-1 Locations of the five dams used in this review .......................................................... 159 Figure 7-1 Trends in gross value of agricultural production (GVAP) in (a) Australia and (b) Queensland over 40 years (1981–2021) ..................................................................................... 174 Figure 7-2 National trends for increasing gross value of irrigated agricultural production (GVIAP) as available water supplies have increased for (a) fruits, (b) vegetables, (c) fruits and vegetables combined, and (d) total agriculture ............................................................................................ 175 Figure 7-3 Mean annual water application rate by horticultural type across Australian states and territories .................................................................................................................................... 176 Figure 7-4 Road layer used in TraNSIT, showing road ranks and heavy vehicle restrictions ..... 183 Figure 7-5 Freight paths from Mount Isa to key ports and southern markets ........................... 185 Figure 8-1 Financial structure of irrigation scheme used in accounting for costs, revenue and use of land and water resources ....................................................................................................... 196 Figure 9-1 Regions used in the (I–O) analyses relative to the Southern Gulf Water Resource Assessment area ......................................................................................................................... 215 Figure 10-1 Viable irrigated agriculture investments in the Southern Gulf catchments require a combination of capturing opportunities and mitigating risks in three critical areas: markets, production systems and competition ......................................................................................... 232 Tables Table 2-1 Gross value of agricultural production (GVAP) first-stage processing and total primary industry estimates and forecasts, 2017–18 to 2020–21 .............................................................. 17 Table 2-2 Major demographic indicators for the Southern Gulf catchments .............................. 38 Table 2-3 Socio-Economic Indexes for Areas (SEIFA) scores of relative socio-economic advantage for the Southern Gulf catchments ................................................................................................ 41 Table 2-4 Key employment data for the Southern Gulf catchments ........................................... 42 Table 2-5 Value of agricultural production estimated for the Southern Gulf catchments and the value of agricultural production for Queensland for 2020–21 ..................................................... 45 Table 2-6 Overview of commodities (excluding livestock) annually transported by road into and out of the Southern Gulf catchments ........................................................................................... 61 Table 2-7 Schools servicing the Southern Gulf catchments ......................................................... 69 Table 2-8 Number and percentage of unoccupied dwellings and population for the Southern Gulf catchments ............................................................................................................................ 69 Table 3-1 Soil generic groups (SGGs), descriptions, management considerations and correlations to Australian Soil Classification (ASC) for the Southern Gulf catchments .................................... 82 Table 3-2 Area and proportions covered by each soil generic group (SGG) for the Southern Gulf catchments .................................................................................................................................... 84 Table 3-3 Qualitative land evaluation observations for locations in the Southern Gulf catchments (A to F) shown in Figure 3-8 ...................................................................................... 87 Table 3-4 Details of irrigation systems applicable for use in the Southern Gulf catchments ...... 89 Table 3-5 Pumping costs by irrigation operation .......................................................................... 89 Table 4-1 Crop options for which performance was evaluated in terms of water use, yields and gross margins .............................................................................................................................. 110 Table 4-2 Crop yields and median irrigation water requirement delivered to the field ............ 112 Table 5-1 Soil water content at sowing and rainfall for the 90-day period following sowing for three sowing dates, based on a Gregory climate on Vertosol .................................................... 121 Table 5-2 Performance metrics for broadacre cropping options in the Southern Gulf catchments: applied irrigation water, crop yield and gross margin (GM) for four environments ..................................................................................................................................................... 127 Table 5-3 Breakdown of variable costs relative to revenue for broadacre crop options ........... 130 Table 5-4 Sensitivity of cotton crop gross margins ($/ha) to variation in yield, lint prices and distance to gin ............................................................................................................................. 131 Table 5-5 Sensitivity of forage (Rhodes grass) crop gross margins (GMs) to variation in yield and hay price ...................................................................................................................................... 132 Table 5-6 Performance metrics for horticultural options in the Southern Gulf catchments: annual applied irrigation water, crop yield and gross margin (GM) ........................................... 132 Table 5-7 Breakdown of variable costs relative to revenue for horticultural crop options ....... 134 Table 5-8 Sensitivity of watermelon crop gross margins ($/ha) to variation in melon prices and freight costs ................................................................................................................................. 135 Table 5-9 Performance metrics for plantation tree crop options in the Southern Gulf catchments: annual applied irrigation water, crop yield and gross margin (GM) ...................... 136 Table 5-10 Breakdown of variable costs relative to revenue for plantation tree crop options . 136 Table 5-11 Likely annual irrigated crop planting windows, suitability and viability in the Southern Gulf catchments .......................................................................................................... 142 Table 5-12 Sequential cropping options for Kandosols .............................................................. 143 Table 5-13 Production and financial outcomes from the different irrigated forage and beef production options for a representative property in the Southern Gulf catchments ................ 149 Table 5-14 Net present values for forage development options ............................................... 150 Table 6-1 Summary characteristics of the five dams used in this review .................................. 159 Table 6-2 Summary of the expectations and reported outcomes for each dam reviewed ....... 161 Table 6-3 Benefits (and disbenefits) included in proposals justifying the five dams reviewed . 167 Table 6-4 Summary of key issues and potential improvements arising from a review of recent dam developments ..................................................................................................................... 170 Table 7-1 Indicative development costs for different types of irrigated farms ......................... 178 Table 7-2 Indicative capital costs for developing on-farm water sources (including distribution from source to cropped fields) ................................................................................................... 179 Table 7-3 Indicative capital costs for developing three irrigation schemes based on the most cost-effective dam sites identified in the Southern Gulf catchments ........................................ 179 Table 7-4 Indicative capital and operating (fixed and variable) costs for a cotton gin from two sources ........................................................................................................................................ 181 Table 7-5 Indicative capital and operating costs for a basic sugar mill capable of processing 1000 t cane per hour ................................................................................................................... 182 Table 7-6 Indicative road transport costs between the Southern Gulf catchments and key markets and ports ....................................................................................................................... 184 Table 7-7 Indicative costs of transmission and distribution lines, for sizes relevant to this Assessment ................................................................................................................................. 187 Table 7-8 Indicative costs of transformer, for sizes likely to be relevant to developments in the Assessment area ......................................................................................................................... 187 Table 7-9 Indicative construction costs for different types of community facilities in Darwin . 188 Table 7-10 Indicative construction costs for new schools .......................................................... 189 Table 8-1 Types of questions that users can answer using the tools in this chapter ................. 191 Table 8-2 Assumed indicative capital and operating costs for new off- and on-farm irrigation infrastructure .............................................................................................................................. 198 Table 8-3 Price irrigators can afford to pay for water based on the type of farm, the farm water use and the farm annual gross margin (GM), while meeting a target 10% internal rate of return (IRR) ............................................................................................................................................. 199 Table 8-4 Farm gross margins (GMs) required in order to cover the costs of off-farm water infrastructure (at the suppliers’ target internal rate of return (IRR)) ......................................... 201 Table 8-5 Water pricing required in order to cover costs of off-farm irrigation scheme development (dam, water distribution and supporting infrastructure) at the investors target internal rate of return (IRR) ........................................................................................................ 202 Table 8-6 Farm gross margins (GMs) required in order to achieve target internal rates of return (IRR) given various capital costs of farm development (including an on-farm water source) ... 204 Table 8-7 Equivalent costs of water per ML for on-farm water sources with various capital costs of development, at the internal rate of return (IRR) targeted by the investor .......................... 205 Table 8-8 Risk adjustment factors for target farm gross margins (GMs), accounting for the effects of reliability and severity (level of farm performance in ‘failed’ years) of periodic risk of water reliability ........................................................................................................................... 207 Table 8-9 Risk adjustment factors for target farm gross margins (GMs) accounting for the effects of reliability and the timing of periodic risks .............................................................................. 208 Table 8-10 Risk adjustment factors for target farm gross margins (GMs), accounting for the effects of learning risks ............................................................................................................... 209 Table 9-1 Key 2021 data comparing the Southern Gulf catchments with the related input– output (I–O) analysis regions ...................................................................................................... 216 Table 9-2 Regional economic impact estimated by input–output (I–O) analysis for the total construction phase of an irrigated agricultural development based on estimated Type ll multipliers determined from the north-west Queensland I–O models ..................................... 223 Table 9-3 Estimated full-time equivalent (FTE) number of jobs created for the construction phase of an irrigated agricultural development ......................................................................... 224 Table 9-4 Estimated regional economic impact per year resulting from four scales of direct increase in agricultural output (rows) in the Southern Gulf catchments, for the different categories of agricultural activity (columns) using the input–output (I–O) model for north-west Queensland ................................................................................................................................. 225 Table 9-5 Type II regional economic multipliers applicable to the ongoing agricultural production phase of the Southern Gulf catchments development ............................................ 226 Table 9-6 Estimated impact on annual household incomes and full-time equivalent (FTE) jobs within the Southern Gulf catchments resulting from four scales of direct increase in agricultural output (rows) for the various categories of agricultural activity (columns) ............................... 226 Part IBackground context Part I providesthe background information and context to supportthe analyses inPartsII and III. Chapter1summarisesthe mainprinciples governing successfulirrigated developmentin northern Australiaand describes the structure of this report. Chapter2describesthecurrent social and economic characteristics of theSouthern Gulfcatchmentsand the existing agriculture and infrastructure base, as background context forthechapters that follow, and the foundation fromwhich anynew development would build. Part IIanalyses the farm-scale performance ofpotential irrigated agricultural development optionsand covers theagronomic principles that determinethe types of croppingsystems that could besustainably and profitably implemented. Part III analyses the scheme-scale viabilityof irrigated development options and economicconsiderations beyond thefarm gatethat wouldbe required for those developmentsto succeed in theSouthern Gulf catchments. Mango fruit Source:CSIRONathan Dyer 1 Introduction 1.1 Rationale and approach Large infrastructure projects, such as new irrigation developments, can deliver substantial social and economic benefits to the regions in which they are built, but are complex and costly investments. The difficulty in accurately estimating costs and the chance of incurring unanticipated expenses during construction, or not achieving projected benefits when completed, mean that there are risks to the viability of developments if they are not thoroughly planned. For example, large water (and other) infrastructure projects routinely cost more and deliver less benefit than originally planned (see review in Chapter 6). In recent decades there has been growing emphasis in Australia on greater accountability and transparency in how water resources are managed and priced (e.g. Infrastructure Australia, 2021a, 2021b; NWG, 2022, 2023), and part of this shift has involved greater scrutiny of the viability of potential new water infrastructure. Similar issues arise, at smaller scale, for on-farm water sources for irrigated development. Past work has examined the factors that contribute most to whether greenfield (mainly irrigated) agricultural developments succeed or fail; this includes lessons from historical farming experiences in northern Australia (Ash et al., 2014; Ash and Watson, 2018), analyses of potential new development options in other northern Australian catchments (Stokes et al., 2017, 2023; Webster et al., 2024), and a financial evaluation of the Bradfield Scheme and more cost-effective water infrastructure alternatives (Stokes and Jarvis, 2021). The broad principles emerging from that work highlight the most important determinants of success for greenfield agricultural development in locations like the catchment of the Southern Gulf rivers: • Although northern Australian environments are challenging for agriculture, the main historical factors determining the success of farming ventures have been management, planning and finances. • By their nature, greenfield developments in new farming locations lack the strong support networks of peers for sharing experiences and learning together, which makes overcoming the initial challenges of adapting farming systems to local conditions more difficult. • It is inevitable that greenfield agricultural development in locations without an established history of farming will initially perform below their long-term potential and allowance needs to be made for a period of learning-by-doing. Staging developments, where possible, allows making mistakes at a small scale, where risks are contained and rectified, before expanding. • Blind overoptimism is unhelpful; it ignores anticipatable risks that otherwise could have been mitigated or avoided (including unrealistic assumptions about productivity, sizes of markets and prices), and wastes time and resources pursuing options long after they should be abandoned. • The rate at which water resources are developed (especially large public water infrastructure investments) needs to be scaled to realistic expansion rates for agriculture and associated trajectories of demand for new water. Building oversized infrastructure that can’t be fully utilised shortly after development is very cost inefficient. • Irrigation developments where crops are irrigated are likely to be accompanied by rainfed cropping. The skills, expertise and services that are brought to an irrigated agricultural area are useful to rainfed cropping too. • Long supply chains and distant processing and phytosanitary (plant health) facilities often put northern agriculture at a competitive disadvantage. Economies of scale are required to support viable local processing and shortened supply chain routes, which often creates a chicken-and- egg dilemma. • Given the competitive disadvantages of farming in northern Australia (versus established southern farming areas), there is a greater imperative for finding the most cost-effective development opportunities, that is, good soils in close proximity to good water resources, both of which can be developed at affordable expense. • The history of irrigated agriculture development in northern Australia shows there have often been those willing to take the risk required to undertake a development. • Agricultural industries that have succeeded in northern Australia have often done so by finding niche opportunities for cost savings and markets (such as out-of-season production), but these usually come at the expense of scalability, limiting the rate at which expansion can occur. All the above themes are strongly echoed and reinforced throughout this report. The report aims to provide information that can assist in planning and evaluating the viability of investments in irrigated development, and quantifying the costs, benefits and risks involved. The intention is to provide a generic information resource that is broadly applicable to a wide range of irrigated agriculture development options, rather than being prescriptive about how future development (if any) in the Southern Gulf catchments (Figure 1-1) should proceed, or examining specific proposals in detail. This report for the Southern Gulf catchments is one of multiple water resource Assessments undertaken for northern Australia (further information in Preface). 1.2 Structure of this report This report complements the overall assessment of potential opportunities and constraints for new irrigated agriculture in the Southern Gulf catchments, by conducting a multi-scale analysis (from farm to scheme, region and markets) that identifies the agronomic, social and economic conditions required for potential new developments to succeed. The chapters of this report are structured into three main parts as follows: Part I: provides the background information for the analyses in the later parts of the report. Chapter 1 is this introduction. Chapter 2 describes the current social and economic characteristics of the Southern Gulf catchments and the existing agriculture and infrastructure base, as background context for the chapters that follow, and the foundation from which any new development would build. Part II analyses the farm-scale performance of potential irrigated agricultural development. Chapter 3 provides background information on tropical agronomy including the environmental factors affecting crop performance (climate, soils, land suitability and water resources), the range of potential crop options, and crop management considerations. Chapter 4 describes the approach used for crop modelling and other quantitative analyses of a set of 19 possible crop options for the Southern Gulf catchments and the methods used to estimate their potential performance (in terms of yields, water use and farm gross margins). Chapter 5 presents the results of the farm-scale analyses, uses narrative risk analyses to illustrate opportunities and challenges for establishing viable new enterprises, and interprets the practical implications of the farm-scale information provided for the types of cropping systems that could be fine-tuned to the environments of the Southern Gulf catchments. Part III analyses the scheme-scale viability of irrigated development options and economic considerations beyond the farm gate. Chapter 6 reviews recent large dam projects in Australia for how well proposed benefits were realised in practice to elicit lessons for future developments and to provide context for the financial analyses that follow. Chapter 7 provides indicators of the demand trajectories for new water (and other) infrastructure from growth in agriculture in the Southern Gulf catchments and describes the types of infrastructure that would be required to support large-scale irrigated development, together with indicative costs and options for building that infrastructure. Chapter 8 uses a generic financial analysis approach to demonstrate the key determinants of irrigation scheme viability that investors need to balance. Chapter 9 quantifies the regional costs and benefits of irrigated development using regional input– output (I–O) analysis. It also includes estimates of the proportions of those benefits that are likely to flow to Indigenous Australians, and an environmental I–O analysis of how increased agricultural water use would stimulate additional demand from other water users. Part IV concludes by summarising key principles for identifying agricultural investment opportunities in the Southern Gulf catchments. Part V is the appendices. Appendix A reviews aquaculture opportunities and their potential viability (mainly summarising previous work). Appendix B presents the current mining and petroleum industry setting in the Southern Gulf catchments, commodities’ water use, critical minerals and strategic materials occurrences, and regulatory frameworks. Figure 1-1 Map of the Assessment area showing the Southern Gulf catchments and catchments from previous related assessments of land and water resources in northern Australia. This Assessment comprises four mainland river catchments (Settlement, Nicholson, Leichhardt and Morning Inlet) plus the larger of the Wellesley island groups Overview Northern Australia map showing Assessment areas \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\1_Exports\Se-S-500_Prawn_fishery_boundaries_v2.png For more information on this figure please contact CSIRO on enquiries@csiro.au 2 Socio-economic context This chapter begins with a general overview of current agricultural industries in Queensland (Section 2.1) and the market opportunities and challenges involved in expanding agriculture in the north-west of the state where the catchment of the Southern Gulf rivers is located (SDILGaP, 2023) (Section 2.2), before providing more specific details on the demography, economy and existing infrastructure in the Southern Gulf catchments (Section 2.3). The information in Chapter 2 primarily focuses on the Queensland portion of the Southern Gulf catchments, given that the NT section constitutes only 20% of the catchments. This NT area consists mainly of conservation and natural environments (45%) and grazing lands (54%), with no permanent settlements. For specific details related to the NT context, readers are directed to consult the Victoria River Water Resource Assessment technical report on agricultural viability and socio-economics (Webster et al., 2024) and the Roper River Water Resource Assessment technical report on agricultural viability and socio-economics (Stokes et al., 2023). 2.1 Agricultural industries of Queensland Queensland’s primary industries, comprising agriculture, fisheries, forestry and food production, play a fundamental role in the state’s economy, regional development, and local communities. The total value of Queensland’s primary industry commodities comprises two components, which are reported separately: gross value of production (GVP) for unprocessed primary commodities, and value of first-stage processing (value-added production). In 2021–22, according to the Queensland Farmers’ Federation, Jobs Queensland, and the Rural Jobs and Skills Alliance, the estimated total value of the agricultural industry of $23.5 billion was made up of $18.4 billion GVP and $5.1 billion value-added production (QFF et al., 2022a). These industries collectively occupy nearly 90% of Queensland’s land area (DESI, 2023). The state boasts over 30 government-owned agricultural facilities, along with an increasing number of agricultural startups. The significance of these primary industries extends beyond the agricultural sector, as they either partially or fully support the employment of approximately 372,000 people, equivalent to nearly one in seven Queensland residents (QDAF, 2022). Family farms make up the majority of the workforce, with overseas workers used substantially in the horticulture sector. Production in the agricultural sector is subject to annual variations, influenced by seasonal conditions and evolving global and domestic demands for Queensland’s agricultural products (Figure 2-1). It is essential to acknowledge that external factors such as exchange rates, commodity prices and weather conditions can influence the actual values achieved (DAF, 2020). While the Queensland agricultural industry is characterised by diversification, the primary contributors to total GVP are meat products (45%), horticulture (31%), sugar (8%) and cereal products (8%), with average output volumes growing at a rate of 5% per annum (Queensland Government, 2023b). Queensland stands as the dominant national producer of several fruits, including bananas (Musa spp.), pineapples (Ananas comosus), mangoes (Mangifera indica), mandarins (Citrus reticulata) and avocados (Persea americana). Additionally, it is the leader in beef and beef processing, hosting major global processing facilities. In the 2018–19 period, Queensland made substantial contributions to the nation’s agricultural production, cultivating 94% of the nation’s sugarcane (Saccharum officinarum), maintaining 50% of the meat cattle herd, and contributing to 26% of the national cotton (Gossypium spp.) production. Furthermore, Queensland accounted for 32% of fruit and nuts, 30% of vegetable, 48% of mangoes, 65% of sorghum for grain (Sorghum bicolor), 53% of capsicums (Capsicum annuum), 57% of macadamias (Macadamia integrifolia), 70% of sweet corn (Zea mays), 48% of avocados and 31% of egg production (DAF, 2020; QDAF, 2023). Figure 2-1 Trends in gross value of agricultural production for crops and livestock in Queensland (1984–2022) Note: The ABS have advised that a reduced set of agricultural value statistics is available for the 2021–22 financial year. This is due to lower quality responses to the Rural Environment and Agricultural Commodities Survey, a major data input to this publication. Source: (QGSO, 2023). Queensland’s agricultural exports reached a record high, contributing $12.5 billion to the state’s economy, in 2022–23. It represents a 16.8% increase over the previous year, with a substantial $1.8 billion gain. The total export value of Queensland’s agriculture sector has grown by 25.2% compared to the average value of the past five fiscal years, driven by robust prices and an 18.3% surge in export volumes, reaching 7.9 Mt (Queensland Government, 2023b). Key growth commodities for 2022–23 include: • cereals and cereal preparations, up 53.6% to $2.5 billion • live cattle, up 53.9% to $147.9 million, with a 9.8% increase in export volume • beef, up 11.1% to $6.3 billion, with volume up 7.4% to 598,765 t. In the horticulture sector, the volume of exported fruit and vegetables rose by 3.3%, with avocados as a standout, showing a 38.5% increase in exports, totalling $38.2 million, along with a 24.1% volume increase (Queensland Government, 2023b). Trends in value of crop and livestock production QLD \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 03,0006,0009,0001984–851985–861986–871987–881988–891989–901990–911991–921992–931993–941994–951995–961996–971997–981998–991999–002000–012001–022002–032003–042004–052005–062006–072007–082008–092009–102010–112011–122012–132013–142014–152015–162016–172017–182018–192019–202020–212021–22Gross value of production ($M) YearCrops (horticulture)Crops (other)Livestock China, South Korea and Japan were Queensland’s top three agricultural trading partners in 2022– 23, with exports to China notably surging by 53.5% in value. Other key markets where Queensland agricultural product exports increased include Indonesia (up 40.1%), the United States (up 19.9%), Vietnam (up 19.6%) and South Korea (up 13.2%). These export increases are reported for 2022–23 and it is important to acknowledge that this rate of growth may not occur into the future. Some potential areas of concern could include fluctuations in commodity prices, adverse weather conditions impacting crop yields, logistical challenges in transportation and distribution, or regulatory changes affecting market access. 2.1.1 Broadacre crops While relatively small compared to southern Australian agricultural regions, broadacre cropping constitutes a significant agricultural endeavour in northern Australia (CRCNA, 2020). Nevertheless, tropical broadacre cropping in this region is characterised by significant financial outlays, and risks, rendering it a complex undertaking for producers. As a result, the agricultural sector is actively exploring strategies to incorporate crop production into a more comprehensive business value proposition, aimed at augmenting the economic viability and environmental sustainability of these enterprises (CRCNA, 2020). Given that the economic feasibility of individual broadacre crops is often tenuous, farmers frequently find it necessary to develop farming systems that maximise the synergistic benefits of multiple crops, thereby establishing sustainable new enterprises. Consequently, it is imperative to assess the production of each crop within the context of a broader business framework to ascertain its potential value addition. For instance, an irrigated agricultural operation has the potential to cultivate a diverse range of irrigated crops in rotation, including watermelons (Citrullus lanatus) or rockmelon (Cucumis melo), hay, cotton, mungbean (Vigna radiata) and maize (Zea mays), with the intention of catering to both domestic and international markets (CRCNA, 2020). The integration of new cropping systems into existing cattle operations can offer several economic advantages for northern pastoral properties. By diversifying agricultural activities, farmers can mitigate risks associated with fluctuations in commodity prices and weather conditions, while also enhancing overall farm productivity and resilience. Moreover, synergies between cropping and livestock enterprises can lead to improved soil health, resource utilisation and profitability. This integrated approach aligns with the broader goal of establishing sustainable farming systems that optimise the use of available resources and maximise economic returns. Queensland’s broadacre industries produce a wide range of commodities including grain, oil, fibre and sugar, contributing around $5 billion annually to the Queensland economy (BQ, 2023). Field crops grown in Queensland include: • winter cereals (wheat (Triticum aestivum) and barley (Hordeum vulgare)) • summer cereals (sorghum and maize) • winter pulses (chickpea (Cicer arietinum) and beans) • summer pulses (soybean (Glycine max) and mungbean) • sugarcane • cotton • peanuts (Arachis hypogaea) • sunflower (Helianthus annus) • canola (Brassica napus) • specialty crops (triticale (× Triticosecale), navy beans (Phaseolus vulgaris), lentils (Vicia lens), rice (Oryza sativa), field peas (Pisum sativum), hemp (Cannabis sativa ssp. Sativa), etc.). The major grain industries in Queensland are wheat, barley, sorghum and maize. Grains are primarily grown in the southern and central regions of the state, with the industry supporting over 2000 businesses and employing around 8000 people. The industry generates around $1.3 billion in revenue annually and is an important contributor to Queensland’s export earnings. Australian grain and pulse export In the 2022–23 crop year, Australia achieved a record grain export of 47.8 Mt, driven by exceptional production in the past three seasons, notably influenced by La Niña. Wheat, barley, canola and sorghum were the key commodities, with wheat leading as Australia’s largest agricultural export. Queensland, ranking last after WA, SA and NSW, contributed 4.3 Mt, accounting for 9% of the total export. The state primarily exported sorghum, constituting 48.4% of its grain exports and making up 74.1% of the nation’s sorghum exports (Paul, 2023). The global pulse markets are highly sensitive to supply and demand dynamics. While Australia is a relatively small player in terms of world pulse production, producing 1 to 2 Mt of pulses in any given year versus global production of approximately 60 Mt (approximately 5%), it typically exporting a significant pulse surplus harvested between October and December (GRDC, 2018). Key export destinations for Australian pulses include Asia, North Africa, the Middle East and the Indian sub-continent. These markets are known for their volatility and the potential for rapid price fluctuations. While Australia is recognised for producing high-quality pulses that can command premium prices, it remains subject to the global supply and demand situation, which can lead to price fluctuations (Pulse Australia, 2023). While global pulse production is not increasing significantly, the population in developing countries reliant on pulse protein is growing. Rising values for wheat and oilseeds and changing dietary preferences influenced by Western diets have led to a decline in pulse cultivation. Growers often perceive pulse production as riskier than some other grain crops. One significant factor contributing to this perceived higher risk is the lack of a futures market for pulses. Unlike cereals and oilseeds, pulses aren’t traded in advance of purchase, making it challenging for growers to predict market conditions with confidence or accuracy. To maximise marketing opportunities, Australian growers must continue to produce a consistent, high-quality product that meets export market requirements. While pulse prices are expected to fluctuate over time, the ongoing demand for premium pulses like chickpeas and lentils is likely to persist (Pulse Australia, 2023). Cotton The Australian cotton industry is renowned for producing high-quality fibre cotton that offers excellent market opportunities for lint and seed by-products. Cotton seed, in addition to lint, is a valuable feed supplement for cattle (meal) or can be processed into a range of products such as oil, soaps and cosmetics. The appetite to grow cotton in northern Australia has led to discussions about the feasibility of establishing a cotton gin in the region to process cotton locally. Several potential locations, including Richmond, Hughenden and Mount Surprise, have been considered for the proposed processing facility. Reducing the costs associated with transporting cotton to distant gins is a key factor in expanding cotton production in north Queensland, making the prospect of a local cotton gin particularly appealing. The potential to reduce expenses through proximity to a gin facility encourages more farmers to venture into cotton cultivation. With the ongoing expansion of cotton production, annual output is projected to increase, provided large-scale water infrastructure is developed to support irrigated production. The growth of the industry is making the idea of a local cotton gin more appealing to investors (Alsop, 2022). With approximately 80% of the cotton crops relying on rain, a dry wet season (as experienced in 2022) will affect many cotton growers in the region. Some rainfed cotton crops have shown reduced yields due to the lack of follow-up rain. Nevertheless, the cotton industry is proving resilient, and many growers are determined to continue planting cotton crops despite the unusual weather patterns (Alsop, 2022). For growers with access to irrigation, the season has presented more positive outcomes. In north-west Queensland, irrigated cotton crops are making progress, and many growers are satisfied with their 2022 crop. Learning and experience gained from unusual weather conditions are helping growers better understand the intricacies of cotton production in north Queensland. The development and success of the cotton industry in the north has garnered interest from a southern ginner and marketer, the company exploring options for establishing a gin in the region through joint ventures, and discussions with local growers and councils highlight the significant potential for cotton production in north Queensland. It is predicted that the region, along with other northern areas in WA and the NT, will produce approximately 160,000 bales of cotton this season, with the potential to increase to over 400,000 bales in five years. Cotton Australia has forecast that the upcoming national cotton crop could be as large as 5.2 million bales, signalling substantial growth from the 2020–21 yield of 2.8 million bales. The region’s cotton industry continues to demonstrate its potential and resilience, fostering confidence in its future development (Alsop, 2022). The GVP for the Queensland cotton industry in the fiscal year 2021–22 reached $1.2 billion, marking a substantial doubling in comparison to the 2020–21 output of $540.2 million. Moreover, this forecasted figure represents a 148% upswing when contrasted with the 5-year average (QGSO, 2023). Projected cotton production is expected to yield an output of 377,300 t of cotton lint (209,000 t in 2020–21). This growth is complemented by an expansion in the total cultivated area, which is predicted to encompass 96,000 ha. Within this acreage, approximately 81,000 ha are designated for irrigation, while the remaining 15,000 ha is classified as rainfed cultivation (DAF, 2020). The prominent cotton-producing regions in Queensland encompass the Darling Downs (33,000 ha), St George (20,000 ha), Dirranbandi (18,000 ha), Macintyre Valley (11,000 ha), Central Highlands (9,000 ha) and Dawson Valley (5,000 ha). Sugarcane Queensland is also the largest sugar-producing state in Australia, with sugarcane grown primarily in the coastal regions. The sugar industry employs over 16,000 people, generates around $2 billion in revenue annually, and is a significant export earner. The majority of Queensland’s sugar is exported, mainly to Asia, but some is also used to produce ethanol and bioenergy. The GVP for sugarcane in the fiscal year 2021–22 amounted to $1.306 billion. This reflects a 7.9% increase when compared to the preceding fiscal year, 2020–21, and a 2.8% increase relative to the 5-year average (QGSO, 2023). The total revenue derived from the 2022–23 sugarcane crop in Queensland, when converted to raw-sugar equivalent, was $1.182 billion (QSL, 2023). It is worth noting that this return is relatively conservative in comparison to what growers who have engaged in forward pricing during a rising market have realised (QSL, 2023). The anticipated average commercial cane sugar content for Queensland’s crop in 2020–21 is expected to be 13.75, which is slightly lower than the 2019–20 figure of 14.09 but aligns with the 5-year state average. Queensland’s sugar production is projected to range from 4.1 to 4.2 Mt, which is marginally higher than the total production of 3.35 Mt in 2023 (QSL, 2023). Crops in the central and northern regions of Queensland benefited from favourable rainfall during February and March, while the southern region experienced sporadic rainfall during the growing season. Consequently, land previously dedicated to sugarcane cultivation in the southern region is being transitioned to higher-value crops or alternative land uses. The double benefit of both strong sugar prices and a weaker currency has seen excellent pricing opportunities, with Australian dollar swap prices rising consistently as the 2022 season progressed to well above $800/t sugar (QSL, 2023). 2.1.2 Fodder The Australian fodder industry has changed markedly over the past decade. Increasing intensity of livestock feeding, expansion in the export market, reduced irrigation allocations and increased climate variability have all contributed to a large increase in fodder demand. Drought, increased competition for irrigation water and land from agricultural and non-agricultural users, together with changes in the relative profitability of crops, livestock and livestock products have combined to reshape patterns of fodder production and use. In adjusting to change, fodder producers and consumers, industry and government all require access to comprehensive up-to-date information on fodder production, use and trade. The Australian animal feed market, valued at US$4.8 billion in 2021, is on a growth trajectory, projected to reach US$5.9 billion by 2028. Beyond mere sustenance, animal feed plays a pivotal role in global food production, ensuring the wellbeing and health of livestock. It has emerged as a critical source of nutrition, fostering improved immunity and accelerated growth in animals. The surge in meat consumption stands out as a primary driver, propelling demand for robust livestock. Both beef and poultry production, fundamental components of this growth, reflect not only an increased appetite for meat products but also the influence of a burgeoning population (KSI, 2023). Within the broader market, cattle feed commands a dominant position. The demand for beef, both domestically and for export, propels the growth of this segment. Rising population levels and income contribute to the increasing demand for meat products, sustaining the expansion of the cattle feed market. Simultaneously, the poultry feed market experiences a surge in demand, driven by the ever-growing popularity of chicken meat and eggs. Government encouragement for poultry production adds momentum to this trend. Government initiatives add a significant layer of support to this thriving industry. Investments by the Australian government in the agriculture sector, exemplified by programs like the Dairy Industry Adjustment Package, aim to enhance the efficiency and productivity of the cattle industry. Such initiatives, coupled with financial backing, contribute to the development and availability of high-quality cattle feed. The market’s segmentation reveals intriguing trends. While the aquatic animal feed segment, encompassing fish, shrimp and other aquatic species, is comparatively smaller, its growth is notable, driven by the escalating demand for seafood. Government investments in aquaculture further fortify this upward trajectory (KSI, 2023). In considering the circular economy and integration on pastoral properties, it is crucial to acknowledge the potential benefits of using fodder on the farm where it is produced, thus minimising its reliance on external markets. Implementing such practices not only reduces transportation costs and carbon emissions associated with fodder distribution but also enhances the sustainability of pastoral operations. By integrating fodder production within the farm ecosystem, farmers can optimise resource utilisation, improve soil health and enhance overall farm resilience. Additionally, this approach fosters a closed-loop system where by-products and waste from livestock can be recycled back into fodder production, further maximising efficiency and minimising environmental impact. Embracing circular economy principles in fodder management can not only benefit individual pastoral properties but also contribute to the broader sustainability goals of the agricultural sector. Hay Hay is the most common method of fodder conservation. In Australia, the common types of hay produced are oaten hay, wheaten hay, vetch hay, lucerne hay, barley hay and a variety of straw hay. Australian farmers produce hay and silage valued at between $800 million to $2 billion each year, making the fodder industry larger than the barley, sugar and poultry industries (AFIA, 2023). Importantly, the availability and distribution of reliable quantities and quality fodder throughout the year is critical for the competitiveness of Australia’s multibillion-dollar livestock industries. The value of the Australian livestock industries, to which fodder is a substantial input, contributed $17.6 billion to gross domestic product (GDP) in 2018–19, with exports valued at $16.3 billion according to Meat and Livestock Australia’s State of the Industry Report 2020. Of the hay produced in Queensland, 48% originated on the Darling Downs (Figure 2-2). Remaining production is somewhat spread out, with substantial volumes produces in Wide Bay, Central Queensland and Ipswich, and a very small amount in the wider Gold Coast and Brisbane regions (Meat and Livestock Australia, 2023). AgriFutures Australia state that around one-third of all Australian commercial-scale farms (38,000 properties) make hay or silage each year, although this would be much lower in the beef cattle industry (AFIA, 2023). So, while some farms specialise in growing and selling fodder specifically, most produce fodder as one component of their overall farm enterprise. While farmers may consider themselves primarily a grain grower or a dairy farmer, they are often also fodder producers too. Droughts naturally drive up domestic demand for fodder, as well as prices, with many farmers planning ahead with their own production, so they can rely on fodder stored on- farm and build capacity to buy in additional fodder if needed. The main constraints to fodder production in Queensland are climate, weed management and nitrogen deficiency in the soils but they also experience similar issues to any other cropping enterprise, low rainfall, insects, fire and costs of plant and equipment. Figure 2-2 Production of hay by regions of Queensland in 2021–22 (tonnes) The integration of hay production into an irrigated cropping system can significantly bolster the net cashflow, forming part of a cropping scheme. Irrigated fodder is cultivated during the dry season, from April to early November, in conjunction with a wet-season crop, like mung beans, which are sown in December or January and harvested in late March (NAAM, 2016). Notably, hay production offers greater flexibility than crop production, with planting and harvesting schedules less vulnerable to adverse conditions. A hay/mung bean system boasts several potential benefits: • generates the required net cashflow of around $2500/ha • allows for more flexible planting and harvest timings, particularly considering annual rainfall variations • imposes fewer constraints regarding the scale required for crop processing Hay production in Qld regions \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0200,000400,000600,000tonnesQueensland regions In addition, existing farms typically possess the requisite machinery and infrastructure for hay production. Silage Successful livestock management involves matching the supply of feed with the animals’ requirements as efficiently and profitably as possible. The aim is a product that meets market specifications when the market wants it. Although grazing is the lowest-cost animal production system in Australia, it may not necessarily be the most profitable. In most regions, seasonal shortages in the quantity and/or quality of feed available for grazing limits production. Most dairy, lamb and beef production systems are based around grazing, but feed supplements are often required to meet production targets. Forage conservation can fill feed gaps by transferring high-quality feed from periods of surplus to times of deficit. Silage is an ideal forage conservation method for this purpose. Silage is made by ensiling or fermenting pastures. It generally produces better quality feed than hay. This is due to the reduced interval when making silage between cutting and conserving the feed – the longer the time, the more the feed nutrients degrade. Early cut silage will have higher quality, but less quantity according to Meat and Livestock Australia (Meat and Livestock Australia, 2024). Silage production and storage is reliant on an anaerobic environment to promote fermentation processes and inhibit undesirable processes and decay. It is critical that this environment is retained during storage of silage. Hay and silage producers provide hay to pre-export facilities where it is further processed and blended with other dietary components to create pellets. These pellets are then dispensed in a manner akin to feedlots, and cattle may also directly consume the baled hay. Estimating the precise supply quantities to pre-export facilities presents a formidable challenge due to the inherent unpredictability of certain markets and cattle processing, which can only be accurately forecast within a few months from the actual order realisation. (Cattle Producer NT, 2014). Fodder export For more than 25 years, the Australian export fodder industry has supplied forage to countries around the world. Key export markets include Japan, China, Korea and Taiwan (AFIA, 2023). According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), almost 1.2 Mt of hay was exported from Australia in 2020, with exports valued at $584 million in 2019–20. This represents considerable growth in the industry since 2006–07 for example, when exports were valued at $242 million. Export fodder includes a wide range of crop and pasture species that are grown, harvested and lightly processed for both on-farm use and export. Export fodder production includes hay and silage of all types (pasture, cereal, lucerne, clover and others), chaff (coarsely chopped dried whole plants), vetch and pelletised feed. The dominant hay exported from Australia is oaten hay. Meeting demand for export hay will require higher hay yield and hay quality, but also will allow growers in non-traditional oat growing regions an opportunity to produce hay for the export market (AgriFutures Australia, 2021). A joint investigation by the Australian Export Grains Innovation Centre, Grains Research and Development Corporation and the South Australian Grains Industry Trust aimed to understand regional differences and reveal potential changes by industry and government that could improve the efficiency of Australia’s grain and fodder supply chains (Kingwell, 2022). Over the past two decades, the value of Australian containerised grains, pulses and fodder has grown significantly, with Australia exporting almost 4.2 Mt of grain and fodder in containers in 2020–21 (Kingwell, 2022). Investments in supply chain infrastructure, greater export market access, and better oversight and regulation are identified as key opportunities for improving the efficiency and sustainability of containerised grain and fodder trade (Kingwell, 2022). Growers and other supply chain investors also require further education to manage commercial risks associated with exporting containerised grain and fodder effectively (Kingwell, 2022). 2.1.3 Horticulture The horticulture industry is a significant contributor to agricultural production in Australia. This industry encompasses four major subindustries, namely fruits, vegetables, nuts and nursery products such as cut flowers and turf (DAFF, 2022). Fruits and nuts account for the majority of horticultural production (52%), followed by vegetables (31%) and nursery goods and ornamental crops (17%) (Entegra Signature Structures, 2022). In the 2019–20 period, horticultural production in Australia was valued at more than $15 billion (DAFF, 2022). Horticultural produce is a highly perishable commodity and requires significant investments in storage and transportation. Additionally, strict phytosanitary standards are imposed on exports, which limits the potential for international trade as well as on interstate trade. Consequently, the majority of Australian horticultural production is sold domestically, with growth being driven by demand from local consumers. While some produce is exported, fresh exports rarely exceed 15% of Australian production. Tropical and subtropical fruits are among the key horticultural produce grown in Australia, including bananas, citrus (Citrus spp.), macadamias and mangoes. In addition, there are also plantings of other fruits, such as rambutan (Nephelium lappaceum), mangosteen (Garcinia mangostana) and durian (Durio spp.). Most of the production of tropical and subtropical fruits takes place in Queensland. As for vegetables, Australian farmers grow a wide range of produce, including asparagus (Asparagus officinalis), zucchini (Cucurbita pepo), squash (Cucurbita spp.), potatoes (Solanum tuberosum), tomatoes (Solanum lycopersicum), carrots (Daucus carota), mushrooms (e.g. Agaricus bisporus), onions (Allium cepa) and lettuce (Lactuca sativa). The use of greenhouses is also becoming increasingly popular in the horticulture industry, enabling year- round production of various crops. Horticulture stands as Queensland’s second-largest primary industry, boasting a value exceeding $2.8 billion annually and employing approximately 25,000 people. With 2800 horticultural farms spanning from Stanthorpe in the south to the Atherton Tablelands in the far north, Queensland is a pivotal contributor to Australia’s fruit and vegetable production, accounting for one-third of the nation’s yield. This sector, characterised by diverse produce, plays a crucial role in regional economies, supporting communities and serving as the primary industry in many areas. The horticultural industry in Queensland encompasses three main subindustries: fruit and nuts, vegetables, and lifestyle horticulture production that grow cut flowers and cultivated turf (Table 2-1). The vast majority of horticultural production is sold to other states. The state holds a prominent position in the production of bananas, pineapples, mangoes, mandarins, avocados, beetroot (Beta vulgaris), and fresh tomatoes and is also a significant producer of citrus fruits, avocados, strawberries (Fragaria × ananassa) and vegetables (Table 2-1). The horticulture industry supports over 30,000 businesses and employs over 50,000 people, generating around $3.6 billion in revenue annually. Production horticulture, while being the most labour-intensive agricultural industry, contributes significantly to employment, with labour costs constituting up to 50% of overall operating expenses (QFF et al., 2022a). Table 2-1 Gross value of agricultural production (GVAP) first-stage processing and total primary industry estimates and forecasts, 2017–18 to 2020–21 For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: (DAF, 2020). A comprehensive overview of the trends in gross value of agricultural production (GVAP) for horticulture compared to other agricultural industries in Australia and Queensland over the past 40 years is shown in Figure 2-3. Horticulture has exhibited a faster increase in value than other agricultural industries during this period, and it now accounts for the second-largest proportion of total agricultural production in Queensland. (a) Australia (b) Queensland Figure 2-3 Changes in agricultural subsectors relative values (GVAP) in (a) Australia and (b) Queensland over 40 years (1981–2021) Data points are decade averages of annual values. Source: ABS (2022a) The horticulture industry in Australia primarily caters to domestic consumption of vegetables, with only a small fraction of vegetables being exported. The major horticulture production regions are situated in Queensland, Victoria, SA and NSW. Throughout the analysed time frame, contribution of these states’ horticulture production slightly increased (VIC +0.5%, SA 0.3%) and even declined (NSW –5.9%), however Queensland’s contribution to national horticultural production rose by 4.4%, from 22.7% in 1981–90 to 17.1% in the last decade (2011–21), as shown in (Figure 2-4). Figure 2-4 Trend in horticultural crop production across Australian states and territories over 40 years (1981–2021) Data points are decade averages of annual values. The share of the ACT is too small to be visible in the bars above. Numbers above columns show Queensland share of total Australian horticultural production. GVAP = gross value of agricultural production. Source: ABS (2022a) Trends in ag sector values, Aust \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0% 50% 100% 1981–901991–002001–102011–21GVAP (%) DecadeCrops (horticulture)Crops (other)Livestock Trends in ag sector values, Qld \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0% 50% 100% 1981–901991–002001–102011–21GVAP (%) DecadeCrops (horticulture)Crops (other)Livestock Trend in Aust hort production \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 04,0008,00012,0001981–901991–002001–102011–21GVAP ($M) DecadeQueenslandVictoriaSouth AustraliaNew South WalesWestern AustraliaTasmaniaAustralian Capital TerritoryNorthern TerritoryNT 0.3% NT 1.0% NT 0.9% NT 0.6% Beyond its economic impact, the horticulture industry in Queensland is intricately linked to tourism, providing income opportunities for backpackers and ‘grey nomads’ annually. Demonstrating efficiency, it achieves high value with minimal resource usage, producing 40% of the value of all irrigated products on only 3% of the state’s total land and utilising just 10% of the state’s irrigation water (QFF et al., 2022a). 2.1.4 Forest and timber Queensland’s forest resources are characterised by large, highly productive softwood plantations and extensive areas of relatively slow-growing native forest comprising both hardwoods and cypress pine (Callitris spp.). These forests support a regionally based processing sector, and most timber is used to produce building products. The GVP for the forest-growing sector within Queensland’s forest industry in the fiscal year 2020– 21 reached $202.5 million. This estimate signifies an 28% reduction in comparison to the final estimate of $283 million for 2019–20 by the Queensland Department of Agriculture and Fisheries (QDAF). It is also 25% lower than the 3-year average of $271 million spanning from 2018–19 to 2020–21. QDAF’s forecast anticipates that the first-stage processing sector of the industry will contribute $427 million to Queensland’s economy in 2020–21, which marks a 12% decline compared to the 2019–20 final estimate of $484 million. The decline in the forecasted GVP for the forest-growing sector in 2020–21 can be attributed to reduced sales of softwood resources in domestic markets, primarily due to the impact of Covid and constraints within the construction sector related to building materials. The forecasted exports of plantation softwood for 2020–21 are expected to be on par with the figures for 2019– 20, even though the recovery of log timber from cyclone-damaged plantations in Byfield has been completed. While there is limited reliable data available for privately owned native forest production, anecdotal evidence suggests that roughly 50% of locally sourced hardwood timber originates from privately owned native forests. It is expected that the demand for hardwood log timber from privately owned land, both in domestic and export markets, will remain steady during the next fiscal year, especially as southern states grapple with reduced supply resulting from the impact of bushfires in 2019–20. The outlook for the forest and timber industry is largely influenced by activity in the housing and construction sector, which accounts for the majority of the demand for domestically produced timber in Queensland, especially plantation-sourced timber. The construction sector has experienced a decline in activity, evident in a 20% reduction in dwelling commencements throughout 2019–20. Early statistics for 2020 indicate a more rapid easing of dwelling commencements compared to the previous year. Oxford Economics Australia forecasts that Queensland will continue to experience a downturn in dwelling commencements for the remainder of 2020–21 (Oxford Economics Australia, 2024). Sawn timber production in Queensland is also impacted by the balance of forest and timber industry imports and exports. Based on provisional 2019–20 information, overseas trade data shows a slight decrease in the value of imports of forest and timber products, declining from $898 million to $870 million. This reduction can be attributed to the decreased value of imported manufactured wood products, falling from $451 million in 2018–19 to $405 million in 2019–20. Imports of log material experienced a slight decrease for the same period, while imports of pulp and paper, particularly sanitary products, increased in 2019–20. Exports of whole logs decreased by 25% in 2019–20, and exports of pulp and paper products decreased by 18%. These declines are likely a consequence of port closures in China during the initial impacts of Covid. In total, exports of timber and wood products from Queensland decreased by 17%, declining from $352 million to $295 million in 2019–20. 2.1.5 Livestock Queensland’s geographic and climatic diversity means that a wide range of crops and livestock can be produced, making it an important contributor to Australia’s food and fibre production. The state’s animal industries include livestock (such as cattle, sheep, poultry and pigs) and livestock products (such as wool, dairy products and eggs). Animal industries contribute significantly to Queensland’s economy (BQ, 2023). The total value of livestock accounts for 52% of GVAP, which amounted to $14.5 billion in 2020–21 (QGSO, 2023). Cattle Queensland boasts the largest beef cattle herd in Australia, constituting 42% of the national total. Globally, Australia accounts for 2% of beef cattle and 15.7% of beef meat exports. In Queensland, two distinct production systems prevail. The northern part of the state is characterised by cattle breeding operations, primarily featuring high Bos indicus content. Northern cattle are directed to live export, manufacturing beef, and backgrounding operations, preparing them for entry into fattening systems (EY, 2018). In the southern regions of Queensland, more intensive cattle production systems thrive, driven by enhanced land productivity and higher rainfall. The herd in the south is predominantly comprised of Bos taurus cattle. Here, the focus is on fattening cattle for eventual processing and export as boxed beef and for the domestic market. The cattle grazing industry in Queensland is predominantly led by family businesses, with a few large, fully integrated corporate operations. Beef production is concentrated in the northern and central parts of the state, where the climate and native pastures are ideal for grazing. The industry supports over 15,000 businesses, employs over 85,000 people, and generates around $15 billion in revenue annually. Data from the 3-year period ending in 2013‒14 indicates that northern Australia (including all of Queensland, as defined by ABARES) was home to over 8500 beef cattle producing farms. Queensland accounted for approximately 97% of these farm enterprises, with the NT and WA comprising 2% and 1%, respectively (Martin, 2015). Some of the major beef cattle breeds in Queensland include Brahman, Santa Gertrudis, Droughtmaster and Charolais (DAF, 2020). The GVP for 2021–22, standing at $6.8 billion, is 15.7% higher than the preceding fiscal year, 2020–21 (QGSO, 2023). While Covid had minimal effects on the agricultural sector, the primary factors influencing the sector’s performance have been seasonal conditions and herd rebuilding. A weaker Australian dollar continues to benefit Australian beef exporters, as domestic processors increasingly rely on foreign markets to absorb surplus supply. The GVP for Queensland’s live cattle exports in 2020–21 was $327 million. Although this figure is 25% less than the number for 2019–20, it remains higher than the average of the past five years (DAF, 2020). The primary reason for this drop was a tighter domestic supply, a consequence of a drought in northern Queensland and reduced demand due to Covid measures that have affected household incomes in importing countries such as Indonesia. In 2020–21, Australian saleyard prices for beef cattle rose by 4%, reflecting strong global demand for beef and reduced cattle supply in saleyards (ABARES, 2021). Export markets remained considerably lower than domestic prices, exerting pressure on processing margins. Favourable wet conditions across northern Australia sustained Queensland prices, allowing northern beef producers to rebuild breeder numbers and hold steers and cull females at higher sale weights (Queensland Government, 2023b). Feedlots Feedlotting plays a pivotal role in the Queensland beef cattle supply chain. Feedlots offer enhanced consistency of quality and reduced supply volatility due to their controlled environment. While feedlots operate independently, they often serve as a crucial element in integrated production systems, aligning with both breeding and processing. The surge in demand for high- quality beef from Asia’s expanding middle class corresponds with the growth of Australia’s feedlot industry (EY, 2018). The number of cattle in feedlots in Australia experienced a decline of approximately 137,000 head, representing a 12% decrease from the June 2019 quarter to the June 2020 quarter (DAF, 2020). This reduction in feedlot numbers was observed in all states. Queensland recorded the smallest decrease, with a 6% drop, resulting in 611,683 head of cattle through feedlots. In contrast, WA saw the most substantial percentage decline, falling by 31%, equivalent to a reduction of 16,385 head from the previous year, followed by Victoria (25%), NSW (17%) and SA (15%) (Queensland Government, 2023b). The success of a feedlot hinges on various factors, including grain prices, drought, domestic feeder cattle prices, and downstream elements such as grainfed beef demand and domestic beef prices. While feedlots are relatively less susceptible to weather volatility compared to grazing production systems, they remain exposed to the impact of weather on grain prices and the supply of feeder cattle, with feeder cattle prices constituting 60% of industry costs. Export During the 2019–20 period, Queensland exported 632,414 t of beef and veal, constituting 52% of Australia’s beef and veal exports. This marked an increase of approximately 10,824 t from the previous year (DAF, 2020). The leading export market for Queensland was Asian markets, including China, accounting for 32% of total exports, followed by Japan at 28% and South Korea at 17%. Notably, exports of fresh and chilled beef experienced an 11% boost, reaching nearly $2.6 billion, while frozen beef exports saw a nearly 19% rise, exceeding $3.6 billion. Approximately 32% of Queensland’s beef exports were transported via airfreight. During 2019 and 2020, China imposed import bans on various Australian abattoirs. Presently, these bans have not significantly affected exports as they can be redirected to other markets. The prominent export destinations for live cattle from Queensland in 2019–20 were Vietnam (68%) and Indonesia (27%), with Indonesia significantly reducing its intake in the last quarter of the period. According to ABARES, Indonesian consumers are showing a preference for purchasing imported boxed beef from Australia through supermarkets or online platforms, which has impacted the outlook for feedlot operators importing live cattle from Australia. Nevertheless, the decline in live cattle exports to Indonesia in the first nine months of 2019–20 was offset by growth in the second most significant market, Vietnam, which was successful in managing the spread of Covid (Queensland Government, 2023b). Markets There is a large and complex infrastructure network supporting the Queensland beef cattle sector. This network comprises transport infrastructure including rail, road, air and sea transport. Transport is focused on live animals, processed beef and feed for feedlots. Given Queensland’s scale and the geographic scale of the industry, transport infrastructure and services are key to its success. Cattle saleyards are also a key component of the beef industry’s infrastructure network. The largest saleyards are located at Gracemere, Roma and Dalby. The overwhelming majority of live exports in 2022–23 were feeder (54%) and slaughter (35%) cattle, with breeder cattle representing an average 10% of live exports (Figure 2-5). Figure 2-5 Trends in Queensland’s live cattle by end use (2017–2023) Source: DAFF (2023) Queensland’s extensive road network covers the state, complemented by state-subsidised livestock rail services and seaports facilitating the export of live cattle and beef. A significant portion of north Queensland’s beef cattle is typically directed to live export channels, while beef cattle in the southern region are predominantly processed domestically (EY, 2018). Trend in Qld live cattle destination \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0100,000200,000300,0002017–182018–192019–202020–212021–222022–23Cattle (thousand heads) Financial yearBreederFeederSlaughter Queensland was the third largest exporter of live cattle amongst Australian states and territories in 2017, with 25.2% of Australia’s total being exported through Townsville, Karumba and Brisbane. Cattle raised in north-western Queensland are also exported through Darwin, Australia’s largest live export terminal (DAFF, 2023). Queensland supplied a total of 123,000 head of live beef cattle to overseas markets in 2023. Indonesia, Japan, Vietnam, Philippines and Thailand are the primary markets for live cattle exports from Queensland (DAFF, 2023). Outlook for Australian cattle The Australian cattle industry has experienced a significant drop in prices due to herd restocking, with a 20% decrease in 2023 (Lefort, 2023). However, analysts remain optimistic about the future, predicting more stable market conditions and a positive outlook for exports. The Australian industry has successfully rebuilt its cattle herd, aided by favourable weather conditions, leading to increased supply and a larger national cattle herd. However, the recent high prices for Australian cattle, leading up to 2023, have prompted Indonesia, a major trading partner, to seek alternative supplies, including Brazilian beef. Despite this challenge, experts predict a positive outlook for the industry, with Rabobank forecasting stable prices and strong beef producer margins (Lefort, 2023). The anticipated lower United States cattle production, increased demand from Japan and South Korea, and China’s economic recovery further contribute to the positive market environment. There are also natural synergies of new cropping with the established beef industry. For instance, forages are well-suited as a first crop to grow in greenfield locations (they are more forgiving and have a ready local market), there are opportunities for vertical integration of forages with beef production (both on-farm consumption and in pelleted form for live export cattle), and cotton seed (separated from lint during ginning) is a good dietary supplement for cattle. 2.1.6 Fishing and aquaculture In addition to these major industries, Queensland also has a thriving aquaculture industry, with prawns (Penaeus spp.), barramundi (Lates calcarifer) and other fish species farmed in the state’s rivers and coastal waters. Queensland fisheries are diverse and extend across more than 7000 km of coastline. Based on a QDAF 2019 survey, commercial fishing in Queensland generates approximately 1800 direct full-time equivalent (FTE) positions and employs about 3300 people. A total of 5500 people are employed in commercial fishing and related businesses such as seafood processing, wholesale, retail and other support industries. In addition, a 2019 survey of recreational fishers revealed approximately 940,000 Queenslanders recalled going fishing in 2018 (QDAF, 2019). There are also currently more than 300 active charter fishing licences. These figures show that even more jobs are related to fishing, through the boating, tackle and tourism industries. The GVP for the Queensland aquaculture industry in the fiscal year 2020–21 was $140 million. This figure represents an 8% increase compared to the previous year and a substantial 25% growth over the 5-year average. Prawn farming remains the dominant sector within the Queensland aquaculture industry. In the 2018–19 period, the value of the prawn sector saw a noteworthy rise of $5.7 million, reaching $80.4 million. Despite the challenges posed by Covid and the reoccurrence of the white spot virus at a farm on the Logan River, it is anticipated that the farmgate value of prawns will continue to ascend in 2020–21. This increase is primarily fuelled by substantial investments in Queensland aquaculture farms made by Tassal Operations Pty Ltd, a leading Australian salmon aquaculture company. They recently received approval for expanding their existing aquaculture farm near Proserpine. Barramundi, as the second-largest sector, is predicted to attain an estimated value of $25.0 million in 2020–21. A short-term reduction in the farmgate value to $1.5 million is anticipated for the freshwater fish sector, mainly involving silver perch (Bidyanus bidyanus), Murray cod (Maccullochella peelii) and jade perch (Scortum barcoo), a result of the closure of southern markets in response to Covid and the ongoing drought. Both the oyster and hatchery sectors are expected to experience slight increases in production levels compared to those achieved in 2019– 20, including the operation of a new oyster farm in Hervey Bay. 2.2 Market opportunities and challenges 2.2.1 Overview North-west Queensland stretches from the Queensland border with the NT to the Great Dividing Range in the east, including the towns of Mount Isa, Cloncurry, Julia Creek, Richmond and Hughenden (DIP, 2010). The region occupies around 12% of the state’s total area but is home to less than 1% of the state’s population. Agriculture stands as a pivotal industry in the north-west Queensland region, making significant contributions to the local economy across the Desert Channels area and the Northern Gulf area. The primary agricultural pursuit is cattle grazing, with Cloncurry hosting Queensland’s second-largest saleyard, responsible for trading 325,000 head of cattle annually (DSDMIP, 2018). This saleyard plays a vital role in the industry’s biosecurity by upholding the state’s tick-free zone. Currently, approximately 75% of the region’s cattle are transported to processing facilities in the Townsville and Rockhampton areas, while the remaining 25% are directed to markets in south-east Queensland. A study by CSIRO highlighted that establishing an abattoir in Hughenden could result in a 65% reduction in livestock transport costs compared to transporting cattle to east coast plants or for live export (Williams, 2015). Besides cost efficiency, the abattoir is anticipated to generate increased employment opportunities and contribute to the local economy. The Queensland Department of Agriculture and Fisheries is actively working towards transforming the Flinders Gilbert Agricultural Zone from predominantly grazing to a more diversified landscape, incorporating irrigated agriculture. This zone encompasses the Flinders and Gilbert rivers, featuring identified water storage and expansive potentially irrigable agricultural soils. The envisioned irrigation developments could span 30,000 to 50,000 ha, facilitating year-round mixed irrigated and rainfed cropping. The anticipated crop production from these developments is projected to exceed $95 million annually. The strategic positioning of this initiative enables efficient delivery of produce to both national and international markets through convenient access to ports and international airports, including those in Townsville. Given the crucial role of land transport in reaching markets, the condition of roads and the connectivity of the network are pivotal factors in the region’s development (DTMR, 2019). Moreover, the Karumba area holds promise for further development in aquaculture and fishing, particularly with the potential for future exports to Asian markets. Enhancing supply chain efficiency is deemed essential to support the growth of the agricultural industry. For instance, upgrading key roads can boost productivity in the cattle industry by providing shorter and more direct routes to markets, addressing capacity limitations, and upgrading road pavements (DTMR, 2019). 2.2.2 Key advantages In the Mount Isa area and broader north-west Queensland, the current focus of the agricultural industry is primarily on extensive cattle operations. However, there are notable opportunities for enhancing and diversifying agricultural production in both the north-west and Southern Gulf regions. According to research conducted by CSIRO, there is considerable potential for irrigated developments in the nearby catchment of the Flinders River. A substantial portion of the Flinders catchment, comprising more than 8 million ha of agricultural soils (with 2 million ha being particularly promising), has the potential for irrigation development ranging from 10,000 to 20,000 ha. This could support year-round mixed irrigated and rainfed cropping, with the possibility of including rainfed cropping in the overall irrigation development strategy. For instance, the production of sorghum for grain or fodder could offer the cattle sector strategic feeding options, catering to specific markets and weight specifications. Furthermore, CSIRO has identified the north-west as a potential new location for aquaculture, exploring possibilities in both the Gulf of Carpentaria and the Leichhardt River for inland freshwater aquaculture. In addition to traditional agricultural pursuits, new opportunities are emerging around spinifex (Spinifex sericeus), a native plant abundant in north-west Queensland. Myuma, a local Indigenous community company, in collaboration with the University of Queensland, has developed innovative techniques to extract nanocellulose from spinifex. This breakthrough has global applications, serving as an additive in latex products such as condoms and gloves, as well as in packaging and road surfacing. Myuma is not only interested in the intellectual property value of these extraction techniques but is also actively involved in developing new industries for inland Australia, exemplified by the construction of a bio-processing plant in Camooweal. The Our North, Our Future: White Paper on Developing Northern Australia, prepared by the Australian Government, has recognised the potential advantages of establishing a rail connection between Mount Isa and Tennant Creek to stimulate development in the region. In alignment with the directives of the white paper, the governments of the NT and Queensland have mutually agreed to collaborate on the initial planning stages to evaluate the economic viability of this proposed connection. The envisioned rail link would not only furnish rail access from the NT to the Port of Townsville but also establish a connection between Mount Isa and the AustralAsia rail link between Darwin and Adelaide, thereby presenting potential benefits for the region (DTMR, 2019). 2.2.3 Opportunities, challenges and constraints Over the medium term, Queensland’s agriculture sector is likely to face several challenges, including supply chain efficiency, rising input costs, climate change, changing trade relations and labour shortages. Despite these challenges, there is a unique opportunity to capitalise on the strong demand for sustainably produced, high-quality food and fibre products. Farmers in northern Australia often face regulatory constraints that make it difficult to secure sufficient land and water resources to not only make their own on-farm investments viable, but also to reach the scale of production necessary to make investments in processing and other steps in new supply chains economically feasible (CRCNA, 2020). This can include investment in facilities like cotton gins and pulse packaging facilities. Underdeveloped pastoral areas are often difficult to convert to alternative land uses such as horticulture due to the lease conditions on pastoral leases, and a high level of investment required for developing road and other infrastructure on-farm. Any investment for farm expansion requires a reliable and secure water supply to make the land more productive. However, the process to negotiate land tenure and access to land and water resources can be complex and expensive (Sangha et al., 2022). Increasing input costs, particularly for fertilisers, pesticides and transport, provide further challenges to the sustainability and profitability of horticultural industries (Sangha et al., 2022). There is little available information on the impacts of pesticides and fertilisers on the environment in northern Australia, outside of the catchments flowing into the Great Barrier Reef. However, offsite impacts from use of fertilisers and pesticides can impact surface water, groundwater and other environmental assets. The companion technical report on agricultural impacts on water quality (Motson et al., 2024) provides a review of available information for northern Australia. Other key challenges for new agricultural development in the NT are discussed below. Market and global demand Population growth, increasing incomes in populous neighbours and an increasing focus on food security are driving a rising demand for sustainable, safe and nutritious food, fibre and other agricultural products, providing the opportunity for Queensland’s food and fibre sector to grow, access new, high-value markets and provide agribusiness and employment opportunities across the value chain. The increasing demand for agricultural exports in Asia presents both opportunities and challenges for Queensland’s agriculture and food sectors. As living standards rise, there is a growing desire for high-quality food products and additional value adding across various quality dimensions. Consumer preferences, along with a heightened concern for environmental and animal welfare issues, food origin and traceability, and production methods, are shaping the demand for novel products. This, in turn, influences the sector’s output, production methods, workforce practices and technology adoption. For instance, the adoption of blockchain technology supports food provenance, especially crucial for the organics sector and tracing food chains. To meet the escalating demand, Queensland farmers may need to enhance their skills and understanding of international business practices while also embracing new technologies (QFF et al., 2022b). Technology Advances in technology and automation, including drones, autonomous vehicles, robotics, artificial intelligence, blockchain and biotechnology, are transforming the agricultural industry. These technologies will be essential to overcome the tyranny of remoteness and unwillingness of workers to go to these regions, as well as the extreme climate for outdoor work. Queensland must prioritise upskilling its agricultural workforce to stay globally competitive, not just in creating and deploying technology but also in responding to it, including data analysis. Besides technical skills, essential capabilities such as collaboration, critical thinking, complex problem-solving and entrepreneurship are crucial. Nationally, a digital capability framework for the agricultural workforce outlines future-required skills, encompassing digital literacy, data management, communication, technology operation and various enabling capabilities. The 2019 Joyce review of the Vocational Education and Training system emphasised the impact of new technologies on changing skills needs in agribusiness, acknowledging the evolving nature of jobs due to the internet of things, artificial intelligence, automation, digital twins and robotics (Commonwealth of Australia, DPMC, 2019). While new skills are essential, traditional skills are expected to remain in demand in the future (QFF et al., 2022b). There are prospects for increased value addition to agricultural products, especially in the realm of food and beverage manufacturing. Additionally, the utilisation of blockchain technology is amplifying possibilities for traceability, thereby establishing a market and price premium for Queensland’s agricultural products with assured provenance. A notable instance occurred in November 2022 when a shipment of sustainably produced raw sugar, fully traceable through blockchain, was exported from Townsville to South Korea. Realising the full potential of opportunities in agriculture necessitates: • sustained investments by farmers in new technologies to enhance and optimise on-farm operations, with a particular focus on the automatic collection and analysis of data, as well as the improvement of water-use efficiency infrastructure • addressing workforce challenges in agriculture, including the short-term scarcity of agricultural workers and accommodations in regional areas. These shortages may be exacerbated in the future by developments associated with the transition to a net-zero economy. Improving supply chain efficiency The Queensland agricultural supply chain exhibits a notable feature – its extensive and scattered geographical layout across the state. With numerous sizable players in agriculture and raw mineral commodity industries, there exists a substantial need for enhanced capacity within the transportation network. The inefficiencies within the supply chain, primarily in agriculture, are most conspicuous at the junctions where various supply chains intersect – such as agriculture, livestock and minerals (Hall and Frew, 2016). To achieve the projected growth in the agriculture sector, it is imperative for stakeholders in the supply chain to address these inefficiencies. This has been acknowledged in the Agriculture Competitiveness White Paper (Commonwealth Government of Australia, 2015), citing that ‘achieving stronger farmers and a stronger economy will require effort by all those with an interest in the sector, including all levels of government, farmers, the broader agriculture sector and industry organisations.’ Enhancing the efficiency, reliability and productivity of the supply chain is pivotal to improving north-west Queensland connectivity to both national and international markets, thereby fostering opportunities for economic growth. The region’s economic productivity and growth are vital for overall prosperity, especially in sustaining employment and fostering resilient communities. Addressing supply chain challenges has the potential to not only enhance the productivity of existing ventures but also catalyse the initiation of new enterprises. It is crucial to recognise that supply chains extend beyond the mere transportation of goods or support for mining and agriculture. Establishing connections between an emerging tourism market and the region’s cultural, historic and natural attractions represents a significant opportunity for economic growth. The transportation system plays a pivotal role in the movement of goods and services within the region and between the region and other destinations, significantly influencing access to employment (DTMR, 2019). Key examples include: • Agriculture: The transportation of cattle and cattle products within the north-west, including to and from the Port of Karumba, and from north Queensland to the Port of Townsville and further south to domestic markets. There is also the potential for future growth in crop production in the catchments of the Flinders and Gilbert rivers. • Access to the Port of Townsville: This is integral for the movement of resources into and out of northern Queensland, encompassing the north-west Queensland region. Although rail is the primary mode of transport to the port, road freight plays a substantial role in facilitating this movement. Climate change and other disruptive events Climate change, including increasingly frequent extreme climatic events, as well as other external threats may stretch resources across competing priorities and challenge the capacity of the department and the sector to respond rapidly and effectively to maintain industry activity, continue labour supply or support recovery. According to the Queensland Government the north- west Queensland region can expect higher temperatures, hotter and more frequent hot days, harsher fire weather and more intense downpours (DES, 2019). The north-west Queensland region boasts a rich heritage of pastoral activities, particularly in beef, sheep and wool production. Predominantly, the land tenure in this region is held through pastoral leasehold arrangements. The pastoral sector faces considerable challenges in terms of profitability, primarily attributed to drought and rural debt. These challenges could intensify with a heightened frequency of drought events. Under drier conditions, there is a potential reduction in forage production, surface cover, livestock carrying capacity, and overall animal production. Such conditions could also lead to significant shifts in the composition of plant and animal species. In addition to these concerns, climatic changes have the potential to impact the distribution and prevalence of pests and diseases in the region (DES, 2019). In response, Climate change in the North West Queensland region (2019) proposed the following adaptation measures: • Enhanced management of pests and diseases through the introduction of more dung fauna species for controlling buffalo fly larvae (Haematobia irritans exigua), increased utilisation of traps and baits for buffalo and sheep blowflies, and the implementation of vaccines for cattle ticks (Rhipicephalus australis) and worms. • Promotion of cattle breeds that exhibit resistance to cattle ticks and buffalo flies, aiming to increase or maintain their population. • Strategic management of climate variability and change by incorporating rainfall and temperature forecasts into decision-making processes related to crop cultivation and planting schedules. • Implementation of mitigation strategies during dry conditions, such as supplementary feeding, early weaning, and culling of animals at risk, to reduce mortalities and ensure the wellbeing of the livestock. Biosecurity, new pest and disease threats Pests, weeds and diseases (‘agripests’) already have a significant impact on Queensland’s agriculture. A changing climate will influence the distribution and behaviour of pests, weeds and diseases affecting agricultural productivity and sustainability. Increased temperatures and changes in rainfall could have multiple impacts on agripests including changing the geographical suitability of both exotic and already established agripests as well as changing the population dynamics and size (e.g. Queensland fruit fly (Bactrocera tryoni) can now overwinter in southern regions). The presence of invasive species poses significant threats to both the environment and primary production in the north-west region. Notably, feral pigs (Sus scrofa), dogs (Canis lupus familiaris), cats (Felis catus) and camels (Camelus dromedarius) are identified as particularly detrimental to the region’s ecosystem. The management of pest plants and animals requires consideration of factors such as land use, climate change and grazing practices (DIP, 2010). Queensland is currently facing multiple, concurrent plant and animal pest and disease threats, both from within Australia and overseas. Foot-and-mouth disease, lumpy skin disease and African swine fever are all on our doorstep in Asia. Within Australia, we are faced with outbreaks such as varroa mite (Varroa destructor) in NSW and Panama disease tropical race 4 (Panama TR4) in the NT and Queensland. The impact of climate change introduces additional complexities, potentially altering the distribution of pest species. Factors such as hotter weather, reduced rainfall and carbon dioxide fertilisation can influence plant growth and productivity, leading to potential changes in both native and cultivated pastures. This climatic shift may result in the redistribution of existing pests, diseases and weeds, while also creating conditions for the emergence of new ones. Water management and use The north-west region relies on various water sources for urban, mining and agricultural needs. Recognised as a critical issue, water management is crucial for the region’s long-term growth. To address this, new infrastructure installation, efficient use of existing water catchments, water recycling, and innovative water utilisation methods are considered essential. The region is serviced by several surface water supplies and the Great Artesian Basin. The development of new water resource infrastructure is identified as a priority for the region, particularly in relation to expected growth of the mining industry and the potential to broaden the economic base of the eastern shires through agricultural activities. Government projects highlight insights into future water resource management in northern Australia. The Northern Australia Land and Water Taskforce emphasise the importance of smart, sustainable development that builds on the region’s unique attributes. Key findings relevant to the north-west region include the potential of small-scale, widely distributed agriculture with a minimal environmental footprint. Additionally, small-scale offstream storage options are deemed viable for supplementary irrigation operations. Large-scale capture and storage of surface water for dry-season irrigation may not meet cost-effectiveness criteria, making the development of groundwater resources a more promising prospect. An integrated approach to mining water needs, considering other industries and regional priorities, is recommended for comprehensive development planning (DIP, 2010). Labour supply Queensland faces distinctive challenges regarding its labour supply. The state’s extensive geographical spread, combined with a relatively modest population, can result in labour shortages across various industries, particularly in regional and remote areas. Key economic sectors in Queensland, such as agriculture, horticulture, tourism and hospitality, often rely on seasonal labour to address the fluctuating demands of these industries. These shortages can impede business operations and limit the growth potential of these sectors. Moreover, Queensland’s climatic conditions, characterised by tropical influences, necessitate a workforce that is adaptable and responsive, especially during peak seasons such as fruit harvesting and heightened tourism activities. In addressing these labour shortages, Queensland has strategically engaged the Pacific Australia Labour Mobility Scheme, which plays a pivotal role in the state’s workforce dynamics. The scheme enables Queensland employers to access workers from Pacific Island countries and Timor-Leste, providing a regulated and dependable source of labour. This program directly mitigates labour deficits in industries like agriculture and hospitality, supporting local businesses, fostering cultural exchange, and promoting cross-cultural understanding within the Queensland community. The agriculture sector in Queensland is anticipated to experience increased demand for specific occupations between 2021 and 2025, with numerous roles associated with farming, crop cultivation and livestock production. Occupations such as ‘farmers and farm managers’, ‘crop farmers’, ‘mixed crop and livestock farmers’, and ‘mixed crop and livestock farm workers’ are expected to be in high demand (Australia Industry and Skills Committee, 2022). Anticipated growth in agricultural production is expected to be primarily driven by productivity improvements. Queensland is well-positioned to embrace innovative technology and continue investments in infrastructure and research and development to expedite digitisation, incorporate new technology, enhance data management and upskill the workforce. These investments are crucial to ensure Queensland’s position as a global leader in food and fibre production. Identifying competitive advantages, along with understanding and meeting consumer preferences in domestic and international markets, will be instrumental in Queensland’s success. A persistent challenge for Queensland’s agriculture, exacerbated by the pandemic, is the availability of both skilled and unskilled labour. With Australia experiencing a resurgence in migration post-pandemic, there is optimism that backpackers and other migrants can once again contribute significantly to meeting the labour demands of the agricultural sector, especially during critical planting and harvesting seasons marked by spikes in seasonal labour needs (Adept Economics, 2023). These investments are critical to ensure Queensland remains a world leader in food and fibre. Finding our competitive advantage, along with understanding and servicing consumer preferences domestically and in existing and new export markets, will be key to our success and build on our 2021–22 exports of $10.87 billion. 2.2.4 Social licence considerations Social licence could broadly be described as the community’s acceptance of a company or organisation based on its relationships, responsibilities and practices. The agricultural industry is adapting to societal expectations by embracing practices related to animal welfare, fair employment, water and land management, conservation, cultural heritage, reconciliation, and minimising losses to the environment. Some semiformal or formal certification initiatives are in place for various agricultural industries. Farmers globally are becoming more aware of the importance of the consumer perception of products they grow. Price, country of origin, health and safety, food integrity and transparency, animal welfare, carbon footprint and people’s diet choices are just a few of the factors that consumers place importance on globally. Crop production The expansion of the cotton industry presents opportunities for economic growth, job creation and infrastructure development in northern Australia. However, there is a shared responsibility to ensure sustainable practices and proper regulation to safeguard land and water, as well as cultural heritage. Calls from environmentalists for updated environment laws and inquiries reflect general concerns by members of the wider community to development in the region. Crop and horticulture production systems almost always necessarily involve the use of synthetic chemicals such as fertilisers, herbicides, fungicides and pesticides. The economic gross margin (GM) analysis undertaken in this report assumes all crop production systems evaluated use these chemicals. Even under industry best-management practices these chemicals can leave the cropping system boundary and have off-site impacts. The Southern Gulf catchments are a relatively undisturbed ecosystem that drains into a highly valuable fishery. Off-site impacts are undesirable and potential misuse of these chemicals impacts the social licence of these developments. However, there is little available information on the impacts of pesticides and fertilisers on the environment in northern Australia, outside of the catchments flowing into the Great Barrier Reef. The companion technical report on agricultural impacts on water quality (Motson et al., 2024) provides a review of available information for northern Australia. Beef production Ethical issues hold significant relevance for the beef industry in Australia, as highlighted in the 2018 Industry Insights report (MLA Industry Insights, 2018). Large export markets for Australian beef, such as Japan and the United States, have similar ethical concerns. A Meat and Livestock Australia report (MLA Industry Insights, 2018) has found that beef producers must focus attention on meeting consumer expectations ‘sooner rather than later’, which includes Australian consumer expectations that live export of cattle is conducted ethically with high animal welfare standards. With so many international competitors producing and trading beef, Australian beef faces the threat of losing market share. The report outcomes found that the marketing of meat products must start on-farm to ensure long-term viability. Beef producers have a positive story for a global marketplace of consumers. In evolving world markets, beef may struggle to keep a foothold as a protein source compared to other meats such as pork and poultry. 2.2.5 Markets and infrastructure Due to the low population density in northern Australia (Section 2.3.1), the demand for locally grown produce is minimal. Thus, producers have to concentrate on supply chains and markets in the southern part of the country for domestic consumption of horticultural produce and export destinations for bulk broadacre commodities (CRCNA, 2020). Despite this, Queensland holds a potential geographical advantage compared to other regions in Australia due to its proximity to Asian and other markets. However, it is also faced with several limitations and constraints. One of the challenges faced by growers in the north-west region is the competition with suppliers from other locations, both domestically and internationally, who have mostly lower production costs. As shown in Figure 2-6, Queensland growers face higher marketing costs, including transportation costs, compared to their counterparts in other parts of Australia. The marketing costs, as reported by the Australian Bureau of Statistics (ABS), cover various expenses related to agricultural produce, such as freight, container costs, commissions and other marketing charges, from the farm gate to markets. Although the data may not be entirely comparable between jurisdictions, they provide insight into the supply chain issues that Queensland growers face compared to the rest of the country. The marketing costs in all three agriculture categories are higher for Queensland than the national average, placing Queensland producers at a competitive disadvantage, especially in the horticulture sector. (a) Australia (b) Queensland Figure 2-6 Comparison of marketing costs, across three categories of agriculture, relative to gross value of agricultural production (GVAP) for (a) Australia and (b) Queensland (average 2011–12 to 2020–21) Source: ABS (2022a) 2.2.6 Export opportunities Asia is a significant market for Australian agricultural exports, representing more than half of the country’s total exports in the sector (Sefton and Associates, 2013). The region’s strong income growth is expected to continue driving demand for food, with projections indicating that Asian agrifood demand will double by 2050. This presents growth opportunities for the Australian food industry, particularly in supplying safe, high-quality meat, dairy, wine, vegetables and branded processed products to the expanding middle class in China, estimated to reach 300 million people in the next decade, with a rapidly westernising diet (KPMG and The University of Sydney China Studies Centre, 2013). The Australian horticulture industry relies heavily on market access, as approximately $3.4 billion worth of horticultural commodities are exported annually, which accounts for about 25% of the total production in Australia (ABARES, 2022). Horticultural commodities such as oranges (Citrus x aurantium spp.), mandarins, avocados, almonds (Prunus dulcis) and macadamias have seen significant expansion in the area planted over the last 3 to 5 years, leading to an increase in horticultural exports and contributing to a higher GVAP for the subsector. Given the relatively small Australian domestic market, expanding international market access for horticultural commodities is essential for future growth. Failure to develop additional markets may result in a price slump on the domestic market, impacting growers’ profitability and leading to industry consolidation as less profitable growers leave the market (ABARES, 2022). Marketing costs of ag categories \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0.05.010.015.0Percent (%) Crops (horticulture)Crops (other)Livestock The Australian horticulture industry faces challenges in exporting products that require high labour and transportation costs. However, due to product seasonality and Australia’s reputation for producing clean and green products, there are profitable market niches and quality lines for fresh produce exports such as pear (Pyrus communis), kiwifruit (Actinidia chinensis), grapes (Vitis vinifera) and onions. Over the years, the real value of fresh and processed horticultural exports has been growing at an average annual rate of 5% in Australian dollars. Australia’s strategic location close to developing markets in Asia and as a supplier to northern hemisphere markets out of season are key advantages for the horticultural industry (Entegra Signature Structures, 2022). The estimated total value of Australian horticultural exports in 2021– 22 was $3.4 billion, with fruits and nuts dominating the market (ABARES, 2022). Oranges, table grapes, carrots, mandarins, and almonds were the top five horticultural exports by volume, while almonds, grapes, oranges, macadamias and mandarins were the top five by value (LEK Consulting, 2021). Asparagus, carrots and cauliflower (Brassica oleracea) were the most important vegetable exports, and cut flowers, especially to Japan, constituted a significant export market (Entegra Signature Structures, 2022). The majority of Australian horticultural produce is seasonal, except for a few products like potatoes, carrots, cauliflower and broccoli (Brassica oleracea) (LEK Consulting, 2021). The horticultural import market in Australia has demonstrated a steady growth in value over the past decade (2010–11 to 2019–20). South Korea, Mexico and China are the primary vegetable suppliers to Australia, with mushrooms, asparagus, garlic (Allium sativum) and onions being the most imported items. New Zealand and the United States are the largest suppliers of imported fruits to Australia, with kiwifruit, avocados, oranges and table grapes being the most imported. In 2019–20, the value of fresh fruit exports was more than triple that of fresh fruit imports. In contrast to horticultural crops, bulk broadacre commodities are traded on large global markets with multiple competing international buyers. The vast majority of Australia’s broadacre commodities are already exported (82% of cereals, 92% of pulses and 98% of oilseeds by value (ABARES, 2022)). Therefore, export markets have the capacity to absorb any potential increases in production from the Southern Gulf catchments. Figure 2-7 illustrates the adaptability of broadacre export markets in accommodating changes in product volumes and market access, even during periods of substantial disruptions to supply chains and market access restrictions before and after the Covid pandemic. Despite these challenges, broadacre commodity exporters easily adapted to available markets and sold all commodities produced each year. Figure 2-7 Adaptability of Australia’s exports of broadacre commodities, as demonstrated by year-to-year variations in export volumes and market mixes before and after the disruptions associated with the Covid pandemic Only the ten largest export destinations for each year are shown. SAR = special administrative region. Source: ABARES Trade dashboard (beta) (2022) 2.2.7 Recent volatility in costs and prices All costs and prices in this Assessment are standardised in real December 2023 Australian dollars (with inflation adjustments made to older sources when necessary). For agricultural commodity prices, that can fluctuate substantially from year to year; the decade mean (2011 to 2021) was used instead (so as not to be influenced by short-term dips and spikes in prices when comparing alternative cropping options). Historically, many agricultural inputs have experienced more moderate year-to-year price volatility than individual food and fibre commodities. However, over the duration of the Assessment, major global events such as the Covid pandemic, the war in Ukraine and other substantial disruptions to market access and supply chains have introduced a period of higher than normal volatility in agricultural input prices. Recent changes in agricultural terms of trade are therefore presented below as context for interpreting the December 2023 pricing used in this report (Figure 2-8). The interrelated inputs of fertiliser and fuel have both more than doubled in price since 2020–21 and materials costs have risen by more than 50% (Figure 2-8 (a)). Relative changes in the costs of many inputs over the past 2 years exceed those over the previous decade. In contrast, the prices that farmers receive for farm produce have not kept pace with increasing input costs (yet), leading to declining terms of trade. Until increases in the costs of farming inputs flow through to increases in the prices of agricultural commodities, managing farm finances will be more difficult. This includes the irrigated farming options evaluated in this report (using 2021 prices). Until it is clear how recent disruptions to farming terms of trade balance out in the longer term, there will be added risk for investors in the agricultural sector. These risks should be borne in mind when using information in this report, particularly the financial analyses. (a) Prices of farm inputs (relative to 2020–21) (b) Prices farms received for farm commodities (relative to 2020–21) Figure 2-8 Farmers’ terms of trade in Australia for (a) input prices and (b) prices received for commodities ABARES (2022) terms of trade indices have been rebased to 2020–21. Indices for 2021–22 are preliminary, and for 2022–23 are forecasts. Axes are on the same scale for both panels to aid comparison. Price volatility for individual commodities can be much greater than for the aggregated categories displayed (e.g. see Figure 5-3). Trends in ag terms of trade for inputs \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0.00.51.01.52.02.53.02010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17 2017–18 2018–19 2019–20 2020–21 2021–222022–23Price index (relative to 2020–21) YearMaterialsFuelFertiliserChemicalsMarketingVehicle & machinery maintenanceStructure maintenanceElectricityWaterInsuranceLabour Trends in ag terms of trade for commodities \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0.00.51.01.52.02.53.02010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17 2017–18 2018–19 2019–20 2020–21 2021–222022–23Price index (relative to 2020–21) YearGrainsOilseedsPulsesIndustrial cropsHayHorticultureLive cattle for export 2.3 Demography and economy of the Southern Gulf catchments This section describes the current social and economic characteristics of the Southern Gulf catchments in terms of the demographics of local communities (Section 2.3.1); the current industries and land use (Section 2.3.2); and the existing infrastructure of transport networks, supply chains, utilities and community infrastructure (Section 0). Together these characteristics describe the built and human resources that would serve as the foundation upon which any new development in the Southern Gulf catchments would be built. 2.3.1 Demographics The Southern Gulf catchments comprise four mainland river catchments (Settlement, Nicholson, Leichhardt and Morning Inlet) plus the larger islands of the Mornington Island catchment in the Gulf of Carpentaria. The catchments fall mainly within Queensland but the western part of the catchments fall within the NT. Within Queensland, the catchments comprise the entire Mornington, Doomadgee and Burke local government areas together with around half of the Mount Isa local government area and smaller parts of the adjacent local government areas, Carpentaria and Cloncurry. Within the NT, the catchments comprise parts of Barkly and Roper local government areas. At the state and territory level, the catchments include part of the electoral division of Traeger in Queensland and a small part of the Barkly electoral division within the NT. At the Australian Government level, the catchments fall in part of the Division of Kennedy in Queensland and a part of the Division of Lingiari in the NT. The population density of the Southern Gulf catchments is fairly low at one person per 4.8 km2, which is about one-fourteenth that of Queensland, and one-sixteenth that of Australia as a whole. The Assessment area contains one significant urban area (population >10,000 people): Mount Isa, a city of over 18,000 residents, was developed to support the mining of the extensive deposits in the study area (particularly for lead, silver, copper and zinc). There are also a number of small towns and communities within the catchments, including Burketown and Doomadgee, and on the Wellesley Islands. Of these smaller towns, only Doomadgee (population 1387 as at the 2021 Census) has a population greater than 1000. The nearest major cities and population centres are the cities of Townsville and Cairns, respectively approximately 1000 and 1100 km from Mount Isa. The Queensland capital city of Brisbane is approximately 1925 km from Mount Isa and Darwin in the NT is 1600 km from Mount Isa. The demographic profile of the catchments, based on data from the 2021, 2016, 2011 and 2006 censuses, is shown in Table 2-2. The ABS reports statistics by defined statistical geographic regions (such as the nested hierarchy of statistical areas), but none of those regions closely approximate the Southern Gulf catchments. Instead, data are shown for: (i) Carpentaria (ABS Statistical Area Level 2 (SA2) region 315021404), being the single region that encompasses the largest geographic area within the boundaries of the catchments (Figure 2-9); (ii) Mount Isa (ABS Statistical Area Level 2 (SA2) region 315021405), being the single region within which the majority of the people of the catchments reside; and (iii) estimated data based on combining the appropriate portions of a number of ABS regions to best match the actual spatial coverage of the catchments (54.4% of Carpentaria SA2 region, 100.0% of Mount Isa SA2 region, 27.9% of Mount Isa surrounds SA2 region, plus small proportions (each less than 6%) of the SA2 regions of Barkly and Gulf, and a very small proportion (less than 1%) of Far Central West). Table 2-2 Major demographic indicators for the Southern Gulf catchments For more information on this figure or table please contact CSIRO on enquiries@csiro.au †Weighted averages of scores for SA2 regions falling wholly or partially within the boundaries of the catchments. Sources: ABS (2006, 2011, 2016, 2021) Census data There are two distinct types of typical resident within the Southern Gulf catchments: (i) being younger and more likely to identify as Indigenous than across Queensland and nationally, and (ii) with incomes differing from the national and state mean; however, the difference depends on whether the comparison focuses on the residents of Mount Isa or residents of the remainder of the catchments. The population is predominantly younger (median age around 31) than is typical for Queensland and the country as a whole (median age around 38); however, the trend from 2011 and 2016 to 2021 suggests that the median age of the Southern Gulf catchments is slightly increasing. The population contains a much larger proportion of Indigenous Peoples (27.3%) than Queensland (4.6%) and the country overall (3.2%). The proportion of Indigenous Peoples varies across the catchments: the Mount Isa SA2 region has a much smaller proportion than the remainder of the catchments, although at 21.4% the rate for Mount Isa is still much higher than that for Queensland and Australia. Beyond Mount Isa, the proportion of Indigenous Peoples within the population exceeds 60%. The heterogeneity of the Assessment area is most clearly demonstrated when focusing on incomes. The median weekly household income for the Mount Isa SA2 region ($2236) is substantially above the amount for Queensland ($1675) and Australia ($1746). In contrast, incomes for the remainder of the catchments are substantially below these rates, with median weekly income in the Carpentaria SA2 region being only $1279. Similarly, the proportion of households in SA2 (excluding those in Mount Isa) on low incomes (less than $650/week) was far higher, and the proportion on high incomes (more than $3000/week) far lower, than the proportion for Queensland and for the country as a whole. The reverse applies for the Mount Isa SA2 region. Figure 2-9 Boundaries of the Australian Bureau of Statistics (ABS) Statistical Area Level 2 (SA2) regions used for demographic data in this analysis and the Tropical North Queensland tourism region The Southern Gulf catchments fall below the national mean for each of the Socio-Economic Indexes for Areas (SEIFA) metrics (Table 2-3). The remote Carpentaria SA2 region, comprising a large geographic area of the catchments, is classified within the first decile for each index, indicating the region is scoring below 90% of the rest of the country on each of the measures. However, the Mount Isa SA2 region, where most of the population live, scores in the 2nd to 4th decile, depending on the specific index. Thus overall, weighted by population, the catchments are in the 2nd decile for the Index of Economic Resources (IER), the 3rd decile for Index of Education and Occupation (IEO), and the 4th decile for the remaining indices. Thus, while the level of disadvantage varies across the catchments, the different components and overall scores are all disadvantaged compared to the mean for Australia as a whole. ABS Statistical area for analysis map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-505_Map_Australia_SoG_tourism_SA2_v3.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Table 2-3 Socio-Economic Indexes for Areas (SEIFA) scores of relative socio-economic advantage for the Southern Gulf catchments Scores are relativised to a national mean of 1000, with higher scores indicating greater advantage. For more information on this figure or table please contact CSIRO on enquiries@csiro.au †Weighted averages of scores for SA2 regions falling wholly or partially within the boundaries of the catchments. ‡Based on both the incidence of advantage and disadvantage. §Based purely on indicators of disadvantage. Source: ABS (2023a) 2.3.2 Current industries and land use Employment The economic structure of the combined Southern Gulf catchments differs from that of Queensland and Australia as a whole, in having lower unemployment rates and a higher proportion of the adult population (aged 15 and older) within the labour force (see participation rates in Table 2-4). However, the catchments are highly heterogeneous, and the data for the Mount Isa region (entirely within the catchments) are very different to the data for the rest of the catchments. For example, the Carpentaria SA2 region, which contributes to the greatest land area of the catchments, has far higher unemployment rates than Queensland and national averages (see unemployment rates in Table 2-4) and far lower participation rates. The Mount Isa SA2 region provides a contrasting story with far lower unemployment and far higher participation rates than those of Queensland and Australia as a whole. There are also noticeable differences in the industries providing the most jobs within the region (Table 2-4), both within the catchments and compared to Queensland and Australia. ‘Healthcare and social assistance’, ‘Education and training’ and ‘Retail trade’ are important employers in the region and nationally, However, ‘Construction’ and ‘Professional, scientific and technical services’ feature within the top five industries by employment across the nation on average but are far less significant in the Southern Gulf catchments. ‘Public administration and safety’ is relatively more important to the employment prospects of workers in the Southern Gulf catchments than the national average. However, ‘Mining’ is the most important industry to the Southern Gulf catchments overall, and to the Mount Isa SA2 region within the catchments. It provides more than double the employment provided by ‘Healthcare and social assistance’ professions, the next most important employer in the region. The heterogeneity of the region is important to note, however, mining is concentrated in the Mount Isa SA2 region (where the majority of the population is concentrated) but is of negligible importance across the rest of the catchments. Table 2-4 Key employment data for the Southern Gulf catchments For more information on this figure or table please contact CSIRO on enquiries@csiro.au †Weighted averages of scores for SA2 regions falling wholly or partially within the boundaries of the catchments. Sources: ABS (2006, 2011, 2016, 2021) Census data Importantly to this Assessment, ‘Agriculture, forestry and fishing’ does not feature within the top five industries for the Southern Gulf catchments. However, the heterogeneity of the catchments is evident when the importance of agriculture in different parts of the catchments is considered. Overall, the proportion of employment in the catchments provided by agriculture was only 2.7% in 2021, similar to the rate for Queensland (2.6%) and Australia as a whole (2.3%). Yet agriculture provided 17.5% of employment for the rest of the catchments excluding Mount Isa and 17.1% in the Carpentaria SA2 region compared with just 0.3% in the Mount Isa region. Over the last three censuses (2021, 2016 and 2011), the percentage of employment from the agricultural sector nationally has been reported as 2.3%, 2.5% and 2.5%, respectively, and for Queensland, 2.6%, 2.8% and 2.7%, respectively, over the same years. That is, the proportion of employment in the agricultural sector has been small and fairly consistent. A broadly similar pattern (fairly consistent and of similar magnitude) is shown within the Southern Gulf catchments overall, having provided 2.7% of employment in 2021, 2.3% in 2016 and 2.5% in 2011. The structural differences across the Assessment area are notable, as are the far higher dependencies on mining in Mount Isa and on agriculture in the rest of the catchments than are found in Queensland or across Australia. These differences can significantly affect the regional economic benefits that can result from development projects initiated within the region compared to development projects that may be initiated elsewhere. Land use The Southern Gulf catchments cover an area of about 108,200 km2, much of which is grazing (77.12%) (Figure 2-10). Of the remaining area, nearly all is conservation and protected land (15.75%). A further 6.42% is classified as water and wetlands, most of which are marine plains and tidal areas located along the coast of the Gulf of Carpentaria. Intensive agriculture and cropping make up a very small portion of the catchments: rainfed and irrigated agriculture and intensive animal production together comprise just 0.03% of the area of the catchments. The other intensive localised land uses are transport, communications, services, utilities and urban infrastructure (0.63% of the area of the catchments) and mining (0.05% of the area of the catchments). Figure 2-10 Land use classification for the Southern Gulf catchments Note: land use data shown for the NT on this map is current to 2017 and 2015 for Queensland. Sources: Department of Environment, Parks and Water Security, NT Government (2022) Land Use Mapping Project 2016–2022, https://www.ntlis.nt.gov.au/metadata/export_data?type=html&metadata_id=ECEEDF0AD4826221E0532144CD9BC059; Queensland Government (2021b) Land Use Mapping Project 2019 https://www.qld.gov.au/environment/land/management/mapping/statewide-monitoring/qlump/qlump- explained Land use ACLUMP map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-514_landuse_v4_new_data.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Agriculture and fisheries The estimated value of agricultural production for the Southern Gulf catchments is given in Table 2-5, together with value of agricultural production for Queensland as a whole. The Assessment area provides a small proportion of the agricultural production of the state as a whole. The value of production is almost entirely derived from livestock, with a small amount of revenue from crops (predominantly from hay) (Table 2-5). Table 2-5 Value of agricultural production estimated for the Southern Gulf catchments and the value of agricultural production for Queensland for 2020–21 For more information on this figure or table please contact CSIRO on enquiries@csiro.au †Weighted averages of scores for SA2 regions falling wholly or partially within the boundaries of the catchments. Sources: ABS (2022a) Value of agricultural commodities in 2020–21 The most recent annual survey data from the ABS describing the value of agriculture by different types of industries (2021–22 survey) are only available at a much larger scale (state and territory level) than the Southern Gulf catchments, making it difficult to accurately estimate the value of agriculture products within the catchments. Hence estimates have been made using the 2020–21 agricultural Census data (Table 2-5), which were published at finer spatial scales (SA2 level, as used for the socio-economic and demographic catchments estimates). Agriculture is not a major source of employment in the Southern Gulf catchments, contributing 2.7% of employment in 2021, similar to the rate for Queensland (2.6%) and Australia as a whole (2.3%). Employment in agriculture will be very location and agricultural industry specific, meaning smaller aggregations could have very high proportions of the population employed by agriculture. For example, the figure for the catchments as a whole is distorted by the presence of Mount Isa, which is heavily mining dominated, where agriculture provides a mere 0.3% of employment. Excluding Mount Isa data from the analysis reveals that for the remainder of the catchments, agriculture provides 17.5% of employment. Agricultural production in the Southern Gulf catchments is dominated by extensive grazing of beef cattle, valued at $242.7 million in 2020–21 (Table 2-5). Queensland’s beef cattle industry is the largest in Australia, and the Southern Gulf catchments target live exports to South-East Asia through the Port of Townsville. Sheep were the favoured stock in the earliest days of grazing. Not reaching profitable wool export expectations due to harsh climate, disease (liver fluke, footrot and lung worm), spear grass (Heteropogon spp.) and blowfly incidence, sheep were abandoned in favour of the more successful cattle. The first cattle stations in the Assessment area were formally taken up in the early 1860s, with cattle arriving from the south. In 1865 the first goods arrived at the present site of Burketown, for a store and hotel, which was under construction. In 1866, eight troopers and a police magistrate were stationed in the area. Grazing occurs on rainfed native and naturalised pastures where productivity is constrained by the variable climate and, in most areas, low-fertility soils. However, vast tracts of moderately fertile cracking clay soils support economically important grasslands. Native pasture growth depends on rainfall, so pasture growth is highest during the December to March period. In the dry season, the total standing biomass and the nutritive value of the vegetation declines. Changes in cattle liveweight closely follow this pattern, with higher growth rates over the wet season than the dry season. These constraints have shaped the types of beef production systems currently operating in the Southern Gulf catchments. Rainfed and irrigated agriculture comprise just 0.03% of the Southern Gulf catchments, with a total value of $0.9 million; it all occurs within the Queensland area of the Southern Gulf catchments. The majority of production is from sorghum and hay and is consumed locally. A small- scale cotton venture in the catchment of the Leichhardt River has seen a few successful years and is looking to expand in the future. Recent changes to Queensland water regulation and new water releases in the neighbouring Flinders catchment has seen interest and expertise from growers in southern states move into northern Australia, focusing on cotton and cereal crops. Horticulture has been proved suitable to the area by Gregory Farm, a 338-ha irrigated development near the Gregory locality where small cropping of mixed vegetables supplied businesses and properties in the area in the 1990s. Gregory Farm is currently baling both irrigated forage crops and some seasonal native grasses. Cropping and horticulture have proved to be agronomically suited to the local environment and soils but have been unable to be established as competitive local industries, partly because of difficulties with access to processing, distance to markets and high transport costs. There is currently no active aquaculture in the Southern Gulf catchments. The closest aquaculture industry was a small prawn farm established in Karumba (40 km east of the boundary of the catchments) in 1974 and closed the following year for economic reasons (Australian Fisheries, 1975). A comprehensive situational analysis of the aquaculture industry in northern Australia (Cobcroft et al., 2020) identifies key challenges, opportunities and emerging sectors. The Queensland Department of Agriculture and Fisheries supports the aquaculture industry, and research from the Northern Fisheries Centre in Cairns retains aquaculture infrastructure for aquaculture research at the Walkamin Research Facility. Early stages of an aquaculture project on Groote Eylandt aims at producing high-end seafood targeting cobia (Rachycentron canadum), clam (Bivalvia), sea cucumber (Holothurians) and oyster (Ostreidae spp.). Offshore, the Southern Gulf catchments drain into one of the most valuable fisheries in the country. The Northern Prawn Fishery (NPF) spans the northern Australian coast from Cape Londonderry in WA to Cape York in Queensland (Figure 2-11), with most of the catch being landed at the ports of Darwin, Karumba and Cairns. Over the 10-year period from 2010–11 to 2019–20, the annual value of the catch from the NPF has varied from $65 million to $124 million, with a mean of $100 million (Steven et al., 2021). The Southern Gulf catchments flow into the Karumba and West Mornington NPF regions (Figure 2-11), the most productive regions by annual prawn catch. Figure 2-11 Regions in the Northern Prawn Fishery and the North West Minerals Province The regions in alphabetical order are Arnhem-Wessels (AW), Coburg-Melville (CM), Fog Bay (FB), Joseph Bonaparte Gulf (JB), Karumba (KA), Mitchell (ML), North Groote (NG), South Groote (SG), Vanderlins (VL), Weipa (WA) and West Mornington (WM). Source: Dambacher et al. (2015) Like many tropical fisheries, the target species exhibit an inshore–offshore larval life cycle and are dependent on inshore habitats, including estuaries, during the postlarval and juvenile phases (Vance et al., 1998). Monsoon-driven freshwater flood flows cue juvenile prawns to emigrate from estuaries to the fishing grounds and flood magnitude explains 30% to 70% of annual catch variation, depending on the region of the catchments (Buckworth et al., 2014; Vance et al., 2003). Fishing activity for banana prawns and tiger prawns (Penaeus spp.), which constitute 80% of the catch, is limited to two seasons: a shorter banana prawn season from April to June and a longer tiger prawn season from August to November. The specific dates of each season are adjusted depending on catch rates. Banana prawns generally form the majority of the annual prawn catch by volume. Key target and by-product species are detailed by Woodhams et al. (2011). The catch is often frozen on-board and sold in domestic and export markets. The NPF is managed by the Australian Government (via the Australian Fisheries Management Authority) through input controls, such as gear restrictions (number of boats and nets, length of nets) and restricted entry. Initially comprising over 200 vessels in the late 1960s, the number of vessels in the NPF has reduced to 52 trawlers and 19 licensed operators after management initiatives including effort reductions and vessel buy-back programs (Dichmont et al., 2008). Given Northern prawn fishery regions map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-501_Portrait_map_Australia_NPF_regions_v2.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au recent efforts to alleviate fishing pressure in the NPF, there is little opportunity for further expansion of the industry. However, development of water resources in the Southern Gulf catchments would need to consider the downstream impacts on prawn breeding grounds and the NPF. There is little available information on the impacts of pesticides and fertilisers on the environment in northern Australia, outside of the catchments flowing into the Great Barrier Reef. The companion technical report on agricultural impacts on water quality (Motson et al., 2024) provides a review of available information for northern Australia. Tourism Overview Tourism in the Southern Gulf catchments is in a moderate state of development. Inherent characteristics constraining tourism in this region include its remoteness, seasonal accessibility by road, and general lack of infrastructure. Like much of northern Australia, the Southern Gulf catchments experience high rainfall during the wet season and occasional tropical cyclones, which can cause flooding and restrict road access for extended periods (Southern Gulf NRM, 2024). Access to much of the Southern Gulf catchments is on unsealed roads. Most tourist visitation, therefore, occurs in the cooler, drier months between May and October (TRA, 2019) with water and water related landscapes and activities sought out by tourists across northern Australia. Broader barriers to tourism development in regional and remote Queensland include a lack of financial resources and human capital, low awareness among regional business owners of tourism system characteristics, and inadequate collaboration between tourism enterprises and service providers (Summers et al., 2019). Nonetheless, sustainable tourism development opportunities in remote areas can be realised when there is a sufficient understanding of regional characteristics and coordinated planning and investment from public and private sectoral partners (Schmallegger and Carson, 2010). Opportunities and competitive strengths of ‘outback tourism’ destinations in regional and remote Queensland include a reputation for authentic interactions with people, places and nature, the warmth and friendliness of local people, native Australian wildlife and geology (including fossils), a pioneering heritage, Indigenous culture, recreational fishing and expansive spaces with minimal signs of human disturbance and development (Outback Queensland Tourism Association, 2021). Supporting organisations and visitation statistics The majority (79%) of the Southern Gulf catchments area is within Queensland, and this area is the most accessible to tourists. In Queensland, the Southern Gulf catchments fall within the Tropical North Queensland tourism region (Figure 2-9), which extends from Queensland’s east coast, encompassing Cape York Peninsula and the Torres Strait, south to Cardwell and west to the NT border. The representative regional tourism organisation is Tourism Tropical North Queensland (Tourism Tropical North Queensland website ). The Tropical North Queensland tourism region covers approximately 20% of the total land area of Queensland. Its largest population centre, Cairns, is a significant inbound tourism destination and is the primary source of international visitors throughout the region. In the year ending March 2023, the Tropical North Queensland tourism region attracted 2 million intrastate visitors for a total of 6 million visitor nights and 938,000 interstate visitors for a total of 7.7 million visitor nights. However, most of this visitation was concentrated on the east coast, within and surrounding the Cairns region (TTNQ, 2023). Visitation and other tourism statistics within the Southern Gulf catchments are limited and reported at the local government area (LGA) scale (Figure 2-12), however, updated assessments have not been reported since the Covid pandemic. Pre-Covid local government area (LGA) tourism profiles of four of the six LGA areas covering the Southern Gulf catchments indicate that 11 tourism businesses were captured in a 2019 survey of the Burke Shire LGA, of which six were ‘non- employing’, three had four or fewer employees, and three had between five and 19 employees (TRA, 2019). While many visitation statistics were unavailable for the Burke Shire LGA (including the number of domestic and international visitors), domestic overnight visitor expenditure in the shire for 2019 was estimated to be $9 million (TRA, 2019). No visitation statistics were available for the Mornington Shire LGA other than the existence of three tourism businesses of unknown size. The adjoining Carpentaria Shire LGA reported 31 tourism businesses, of which ten were ‘non- employing’, nine had four or fewer employees, 11 had between five and 19 employees, and three had 20 or more employees (TRA, 2019). Annual visitation included 44,000 domestic visitors (30,000 intrastate) staying for a total of 240,000 visitor nights (five nights average stay) and contributing $22 million in regional expenditure. An additional 3000 international visitors staying 29,000 visitor nights (10 nights average stay) contributed $2 million (TRA, 2019). The Mount Isa City LGA reported 192 tourism businesses, of which 76 were ‘non-employing’, 61 had four or fewer employees, 46 had between five and 19 employees, and 15 had 20 or more employees. Annual visitation included 154,000 domestic (100,000 of which were intrastate) and 10,000 international visitors staying for a total of 660,000 visitor nights (four nights average stay for domestic and 11 nights for international visitors), contributing more than $132 million in regional expenditure. However, a large proportion of the visitors to Mount Isa City LGA (approximately 95,000) had travelled there for business purposes (TRA, 2019). Doomadgee LGA recorded zero values for all criteria and the Cloncurry LGA profile is not included as only a small part of the west of the LGA falls in the Southern Gulf catchments. High summer temperatures and humidity result in most tourist visitation occurring during the drier, cooler months with 80% of visitation to the Gulf Country falling between April and October. Road closures and seasonal business closures have further impacts on the ability of the region to have visitors year-round (Tourism Tropical North Queensland, 2024). This seasonality of visitation has flow-on effects for tourism-connected industries such as accommodation, food services and transport. These remote LGAs recognise the importance of the tourist experience to the regional economy and proactively contract evidence-based tourism development strategies (e.g. the Mount Isa tourism development strategy prepared for the Mount Isa City Council, 2020 (https://discovermountisa.com.au/visit/mount-isa-tourism-development-strategy-2020-2025/)). Predominant visitor market – self-drive tourists Self-drive tourists are the predominant visitor market type in the Southern Gulf catchments, and they represent 87% of visitors to outback Queensland (Outback Queensland Tourism Association, 2021). A strategically promoted transcontinental ‘adventure’ self-drive traveller route, the Savannah Way, connects Cairns to Katherine (NT) then continues to Broome (WA) and traverses the Southern Gulf catchments via Burketown (878 km from Cairns), Doomadgee and Hell’s Gate Roadhouse (https://www.savannahway.com.au/). The route south from Burketown to Gregory Downs then west to Boodjamulla (Lawn Hill) National Park and continuing through to Riversleigh World Heritage area and on to Camooweal links to the Overlanders Way (Townsville to Tennant Creek (NT) via Mount Isa). Self-drive tourists consist of a range of market types, including several demographically distinct groups with differing motivations, travel preferences and behaviours. Research on the profiles of visitors to outback Queensland reveals three major age groups among such travellers. Over 55s, many of whom could be considered ‘grey nomads’, represent the largest segment, making up 31% of visitors. The next largest age group segment is the 25- to 34-year-olds (20% of visitors) and then the 35- to 44-year-olds (19%) (Outback Queensland Tourism Association, 2021). Travel motivations among grey nomads often include a desire for learning opportunities and expanding their knowledge, seeking relaxation and recreation, physical activity, social opportunities and escaping a southern winter. Self-drive visitation to regional and remote parts of Australia has a strong appeal to such travellers, who often share a love of country and enjoy the flexibility of self-driving for exploration and discovery (Wu and Pearce, 2017). Some of these motivations overlap with those of younger and international travellers (e.g. backpackers), who also often seek adventure and opportunities to connect with the natural environment (Ooi and Laing, 2010). Figure 2-12 Local government areas and the Tropical North Queensland tourism region that statistics on tourism visitation are extracted from Tourism regions map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-518_LGA_tourism regions_v03.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Tourism infrastructure Within the Southern Gulf catchments, Mount Isa has the largest domestic airport which in offering a gateway to the region is an advantage over many other parts of northern Australia. Several regional airlines provide regular services to and from Brisbane, Townsville and Cairns. Smaller commercial regional airports are located in Burketown, Doomadgee and Gununa on Mornington Island, providing regional connections between Mount Isa and Cairns. All airports cater for light aircraft, and the nearest international airports are in Cairns and Darwin. Caravan parks and camping grounds provide critical self-drive tourism infrastructure and can provide a base for travellers seeking to extend their stay and explore a region’s attractions in greater depth. Multiple accommodation options and types are available within and surrounding Burketown and Mount Isa. Wet-season closures apply to camping and accommodation at Boodjamulla National Park and Wugudaji-Adels Grove, and may be applicable elsewhere. Camping within national parks and on property managed by Traditional Owners requires a permit. Visitor information centres are also critical tourism infrastructure, particularly for self-drive visitors. Two such centres exist within the Southern Gulf catchments: at Mount Isa (Mount Isa Tourism website ) and at Burketown (Burke Shire Council website ). Some visitor information services are also provided by the Burke and Wills Roadhouse, Hell’s Gate Roadhouse and various accommodation providers across the catchments. Regional attractions Key inland attractions for visitors to the Southern Gulf catchments include the iconic Boodjamulla National Park (Lawn Hill) and Wugudaji-Adels Grove. The Riversleigh World Heritage Area is renowned for its fossil fields containing Gondwanan specimens dating from 25 million years ago (Queensland Government, 2017). Visitor attractions and activities throughout the catchments include a range of nature-based activities such as bird and wildlife watching. Popular coastal attractions and activities include river cruises, four-wheel-drive cultural tours, hot air ballooning, fishing charters and astronomy (with one Indigenous-owned tour operator from Burketown providing stargazing tours). The World Barramundi Fishing Championships is held annually in Burketown over the Easter long weekend. At Gregory Downs, significant events include the annual Gregory Downs Race Day (horse racing) and the Gregory River Canoe Marathon. Since 1959, Mount Isa has been hosting a rodeo event each August that is claimed to be the largest of its kind in the Southern Hemisphere. It attracts celebrity performers, hundreds of competitors and several thousand visitors (Mount Isa Rodeo, 2023). In the Gulf of Carpentaria, spring weather between September and November occasionally brings rare ‘morning glory’ cloud formations, and the Morning Glory Festival is held in Burketown in late September to celebrate this meteorological phenomenon (Burketown Visitor Centre, 2017). Two large reservoirs, Lake Moondarra and Lake Julius are located on the Leichhardt River in the Southern Gulf catchments. These reservoirs are managed under the Queensland Water Act 2000 and provide urban water supply (Mount Isa), industrial water supply (mining) and recreational activities. The proximity of Lake Moondarra to Mount Isa (i.e. 18 kilometres) means it is regularly visited by local and regional residents, with water sports and viewing sunset at Lake Moondarra popular activities. Other recreational activities at both lakes include swimming, kayaking and sailing, with water skiing only permitted on Lake Moondarra. Boating and fishing are allowed with some restrictions and both lakes are stocked with barramundi and saratoga. Lake Moondarra hosts the North West Fishing Classic with $20,000 in cash and prizes across the event in 2023. Although it is ~110 km north of Mount Isa it can be accessed via a well maintained and wide dirt road. Tourism development opportunities and considerations The state of northern Australia’s tourism economy is closely tied to the state of its ecosystems (Prideaux, 2013). With a large proportion of the Southern Gulf catchments in a ‘natural’ state relative to many parts of south-eastern Australia, there is potential for growth in nature-based tourism. However, like other remote areas of northern Australia, the region’s remoteness and distance from urban centres (Bugno and Polonsky, 2024), lack of supporting infrastructure, limited human capital and financial resources, and low awareness of tourism system characteristics (Summers et al., 2019), considerably constrain its potential. The seasonality of visitation also limits enterprise profitability (Bugno and Polonsky, 2024) and permanent employment opportunities. Also important to consider is that much of the catchment’s appeal to self-drive visitors is likely to be the absence of other people and commercial infrastructure, which presents opportunities for exploration and solitude (Lane and Waitt, 2007; Ooi and Laing, 2010). Hence development that alters the region’s current characteristics could be alienating to some current visitor markets. While water resource development for agriculture has the potential to negatively affect tourism and future opportunities in the Southern Gulf catchments, for example, through declining biodiversity and perceived reduced attractiveness (Pickering and Hill, 2007; Prideaux, 2013), such development may present opportunities to foster tourism growth. For example, Lake Argyle in the East Kimberley region (WA), developed as an irrigation dam to supply the Ord River Irrigation Area, is among northern WA’s must-see attractions, offering a wide range of tourism activities (https://www.australiasnorthwest.com/explore/kimberley/lake-argyle). While visitors to the Kimberley region reportedly perceived Lake Argyle in the same way they perceived some ‘natural’ local attractions such as billabongs, irrigated agriculture of the Ord River Irrigation Area is perceived differently, as being ‘domesticated’ (Waitt et al., 2003). Elsewhere in northern Australia, water resource infrastructure, including Fogg Dam (NT), Tinaroo Dam (Queensland) and Lake Moondarra (Queensland), has resulted in increased visitation by tourists for the enhanced wildlife or recreation opportunities they provide (e.g. Regional Development Australia, n.d.). However, the ongoing contributions of dam to their local economies vary. For example, the value of recreational fishing has been found to vary between dams depending upon whether there are other dams nearby and their proximity to tourism traffic (Rolfe and Prayaga, 2007). Visitation numbers to the Southern Gulf catchments suggests that the recreational fishing value of a new dam in the Southern Gulf catchments would be limited. Agritourism opportunities, for example, through property accommodation and other travel support (fuel), offer an opportunity for revenue diversification, although impediments such as highly variable seasonal demand limit profitability (Bugno and Polonsky, 2024). Tourism has the potential to enable economic development within Indigenous communities because Indigenous tourism enterprises, usually microbusinesses, often have some competitive advantages (Fuller et al., 2005). Successful tourism developments in regional and very remote areas such as the Southern Gulf catchments are highly likely to depend on establishing private and public sector partnerships, ensuring effective engagement and careful planning with Traditional Owners and regional stakeholders, and building interregional network connectivity and support (Greiner, 2010; Lundberg and Fredman, 2012). As well as economic and employment opportunities, tourism can cause impacts such as native habitat loss, and foot traffic, bikes or vehicles may cause environmental damage such as erosion and a loss of amenity to local residents (Larson and Herr 2008). Other risks include the spread of weeds and root rot fungus (Phytopthora cinnamomi) carried on vehicles and people (Pickering and Hill, 2007). Given the importance of climate on tourism seasonality, demand and travel patterns in northern Australia (Hadwen et al., 2011; Kulendran and Dwyer, 2010), the increased temperatures and occurrence of extreme weather-related events (e.g. drought, flood, severe fires and cyclones) associated with climate change are likely to be significant threats to the industry in the future. These are likely to negatively affect tourist numbers, the also length and quality of the tourist season, tourism infrastructure including roads, and the appeal of the landscape and its changing biodiversity (Amelung and Nicholls, 2014; Prideaux, 2013). Mining and petroleum The city of Mount Isa is the regional centre of the Southern Gulf catchments and a central hub of the North West Minerals Province (Figure 2-11) - considered to be one of the world’s most significant areas for producing base and precious metals. Mining is by far the largest industry in the Southern Gulf catchments and in Queensland, was worth $86.5 billion in nominal gross value added (GVA) terms in in 2022–23 (Queensland Treasury, 2024). Mining provides about 28% of all jobs in the Southern Gulf catchments and approximately 30% of the labour force of the Mount Isa urban area is employed directly in mining in a range of occupations. The largest industry in Queensland in nominal gross value-added terms was mining – worth $86.5 billion in 2022–23 (Queensland Treasury, 2024). Across Australia, mining uses about one-tenth of the water used by irrigated agriculture, and water for mining is assigned a higher reliability than agriculture. The concentration of mining and industrial activity around Mount Isa has resulted in sufficiently high water demand from high-value industries for the construction of five large, purpose-built reservoirs of at least about 10 GL capacity in the Leichhardt catchment, including Leichhardt Dam (Lake Moondarra) and Julius Dam (Lake Julius). Occurrences of critical minerals and strategic materials have been recorded in the Southern Gulf catchments, and mineral and petroleum exploration leases cover 67% of the study area (Apx Figure B-2) with future demand for minerals highly speculative as is mining water consumption and use. Appendix B presents the current mining and petroleum industry setting in the Southern Gulf catchments, commodities’ water use, critical minerals and strategic materials occurrences, and regulatory frameworks. 2.3.3 Current infrastructure Transport A modest road network services the Southern Gulf catchments, from sealed major highways to unsealed minor connection roads, all of which are subject to flooding and wet-season closures. The roads in the catchments have previously benefited from the Northern Australia Beef Roads Program, which has funded upgrades to key roads necessary for transporting cattle to improve the reliability and resilience of cattle supply chains in northern Australia, reducing freight costs and strengthening links to markets. The Barkly Highway (Figure 2-13) is the only sealed road between the NT and Queensland. It runs through the most southern part of the Leichhardt catchment at Mount Isa from the Three Ways Roadhouse just north of Tennant Creek, NT, east to Cloncurry, Queensland. This highway continues as the Flinders Highway to Townsville on the east coast, a key route in the national supply chain network supporting many industries, including agriculture and mining. All road network information in this section is from spatial data layers in the Transport Network Strategic Investment Tool (TraNSIT; Higgins et al., 2015). Trucking volumes calculated from TraNSIT show the largest volume of trailers occur on the Wills Developmental and Burke Developmental roads. Both of these roads are sealed and are predominantly used to support the cattle industry (Figure 2-17). National Highway 1 runs east–west across the Southern Gulf catchments through Burketown. It has sealed and unsealed sections and is also known as the Savannah Way, a popular four-wheel drive tourist route. Sections of this road also have local names (e.g. Doomadgee–Westmoreland Road). Rankings of the road network in the Southern Gulf catchments are shown in Figure 2-13. Heavy vehicle access restrictions for roads, as determined by the National Heavy Vehicle Regulator, show good connectivity for Type 2 road trains (Figure 2-14). These are vehicles up to 53 m in length, typically a prime mover pulling three 40-foot trailers (Figure 2-15). A large proportion of the classified non-residential roads in the study area permit Type 2 road trains despite the poor road conditions of many of the local unsealed roads. Large (Type 2) road trains are permitted due to minimal safety issues from low traffic volumes and minimal road infrastructure restrictions (e.g. bridge limits, intersection turning safety). Drivers regularly use smaller vehicle configurations on the minor roads due to the difficult terrain and single lane access, particularly during wet conditions. Figure 2-13 Road rankings and conditions in the vicinity of the Southern Gulf catchments Rank 1 = well-maintained highways or other major roads, usually sealed; Rank 2 = secondary ‘state’ roads; Rank 3 = minor routes, usually unsealed local roads. The ‘Rank 1’ road is the Barkly Highway, which runs from the Three Ways Roadhouse (north of Tennant Creek) in the NT to Cloncurry, Queensland, east of Mount Isa. Road rankings map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-508_TraNSIT_road rankings_v2.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 2-14 Roads accessible to Type 2 vehicles in the vicinity of the Southern Gulf catchments: minor roads are not classified Type 2 vehicles are illustrated in Figure 2-15. Road truck class map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-509_TraNSIT_truck type_v2.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 2-15 Common configurations of heavy freight vehicles used for transporting agricultural goods in Australia Figure 2-16 shows the mean speed achieved for freight vehicles for the road network. The road speed limits are usually higher than the mean speed achieved for freight vehicles, particularly on unsealed roads. Heavy vehicles using such unsealed roads would usually achieve mean speeds of no more than 60 km/hour, and often as low as 20 km/hour when transporting livestock. Rail access in the Southern Gulf catchments is from a single point, Mount Isa, and has both a freight and passenger (the Inlander) service. The Great Northern Railway (also known as the Mount Isa line) is a critical link from the North West Minerals Province at Mount Isa to the Port of Townsville, primarily carrying bulk commodity transport (mostly minerals) for export. Several train operators manage rolling stock of incoming and outgoing freight. Queensland Rail (a statutory authority of the Queensland Government) owns the narrow-gauge line (3 feet 6 inches, 1067 mm). The narrow gauge was chosen purely for economic reasons: because Queensland distances are large, the narrower gauge was cheaper to construct. For more information on this figure, please contact CSIRO on enquiries@csiro.au Figure 2-16 Mean speed achieved for freight vehicles on roads in the vicinity of the Southern Gulf catchments’ Data source: Spatial dataset of the location and attributes of roads and ferries sourced from HERE Technologies (2021). Road speed map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-510_TraNSIT_road_speed_v2.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Supply chains and processing Table 2-6 provides volumes of commodities transported into and out of the Southern Gulf catchments annually by road, and Figure 2-17 shows the location of existing agricultural enterprises in the catchments. Agricultural production is dominated by beef and live cattle export, which is reflected in the annual freight volumes for transporting cattle across the road network into (~53,200 t in 2023) and out of (~42,600 t) the Southern Gulf catchments according to TraNSIT records of truck movements. Live export of cattle to the Port of Townsville accounts for the majority of cattle movements. There are also substantial transfers of cattle between properties and smaller volumes directed to domestic markets via abattoirs and feedlots in southern Queensland; however, the closest abattoir is Townsville. There are currently no processing facilities for other agricultural produce within the Southern Gulf catchments. All rainfed and irrigated agriculture (0.03% of the catchments) is currently for property requirements. Feasibility assessments for cotton processing in northern Queensland have found that northern Queensland collectively has the potential to generate cotton production levels necessary to support the establishment of a viable cotton gin (MITEZ, 2021). Rail access is from Mount Isa and is a critical link from the North West Minerals Province at Mount Isa to Townsville and a port. The Port of Townsville (inset map on Figure 2-17), primarily carrying bulk commodity transport (mostly minerals) for export is the closest port for bulk export and operates within the Great Barrier Reef World Heritage Area. This port is northern Australia’s largest container import facility, and exports primarily service the Queensland agricultural and mineral provinces. Port services also support imports and exports of general cargo for a range of domestic and industrial commodities (e.g. fuels, food, vehicles, commercial machinery and manufactured items). The port is managed and operated by a government-owned corporation, the Port of Townsville Limited, and currently operates with 11 berths. Also under the same management is the Port of Lucinda (inset map on Figure 2-17), located on the east coast 100 km north of Townsville, and is a sugar export facility. Ports North, also a Queensland government- owned corporation, manages eight ports in far north Queensland, four with sealed road access from the Southern Gulf catchments. The Port of Burketown, inside the catchments, is a declared port, however, no commercial trade takes place. To the east just outside the catchments the Port of Karumba provides for general cargo, fuel, fisheries products, zinc transhipment and has previously seen export of live cattle. On the east coast, the Port of Cairns, a regional port, services bulk and general cargo, fishing fleet, cruise liners and passenger ferries to the reef. The export of raw sugar and molasses from the local sugar-growing districts is through the Port of Mourilyan. The only port of the western Gulf of Carpentaria is the Port of Bing Bong (inset map on Figure 2-17), owned and operated by Xtrada, providing a bulk loading facility exporting lead/zinc concentrate. Table 2-6 Overview of commodities (excluding livestock) annually transported by road into and out of the Southern Gulf catchments Quantities are on an annual basis. Indicative transport costs are the mean for each commodity and include differences in distances between source and destinations. For more information on this figure or table please contact CSIRO on enquiries@csiro.au Source: 2023 data from TraNSIT (Higgins et al., 2015) Figure 2-17 Annual amounts of trucking in the Southern Gulf catchments and the locations of pastoral properties. Inset maps shows locations of ports The thickness of purple lines indicates the volume of traffic (as number of trailers per year) on regional roads connecting local enterprises. Annual volumes of trucking and ports, map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-511_TraNSIT_ag enterprises_v5.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Energy The only major electricity network in north-western Queensland is the North West Power System (NWPS), which connects Mount Isa to the Century Mine (zinc) near Lawn Hill in the north and Cloncurry to the east outside the Southern Gulf catchments (Figure 2-18). The NWPS is isolated from the National Electricity Market (NEM), Australia’s largest electricity network, which stretches along Australia’s east coast from northern Queensland to Tasmania and SA. Most power stations in the NWPS are gas-fired, which has resulted in high electricity costs compared to the NEM (Queensland Government, 2021a). The NWPS does not operate via an electricity market, but rather has negotiated supply contracts, which suits large industrial and mining operations in the region (APA, 2022). Ergon Energy operates the distribution network in this region and all country areas of Queensland (Figure 2-18). Powerlink operates the NEM transmission network in Queensland (AEMO, 2023). Already one of the world’s longest interconnected power systems, the Queensland Government plans to connect the NEM to the NWPS with the development of the CopperString 2032 project. The connection will consist of a 1100-km transmission line from Townsville in the NEM to Mount Isa in the NWPS. Little benefit will be realised within the Southern Gulf catchments outside the Mount Isa area. The Diamantina Power Station, near Mount Isa, is a combined cycle gas turbine plant with a capacity of 242 MW. This power station supplies the NWPS. It also has 60 MW of backup from the nearby open cycle gas turbine Leichhardt Power Station. Doomadgee, Burketown and Gununa are not connected to any grids and have their own community power stations, which are supplied and maintained by Ergon Energy. Burketown and Gununa are isolated diesel power stations and Doomadgee’s 568 kW ground-mounted solar farm and 105 kW of rooftop solar (on four Doomadgee Shire Council buildings) provide power with backup supplied by diesel generator. Gas pipelines are located in the most southerly part of the Southern Gulf catchments where the Northern Gas Pipeline stretches from the NT to Mount Isa, and then the Carpentaria Gas Pipeline connects Mount Isa to Ballera in southern Queensland (AER, 2021). Figure 2-18 Electricity generation and transmission network and pipelines in the Southern Gulf catchments Power generation and transmission map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-507_energy generation distribution_v4.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Water Communities and industries in the Southern Gulf catchments source their water from either surface water or groundwater for a variety of purposes, including: (i) stock and domestic purposes, (ii) town and community water supplies, and (iii) industries such as agriculture and mining. For some uses, surface water is pumped from the occasional dam or stream. In the case of Mount Isa’s water supply, a major water transmission pipeline supported by pumping stations is used to transfer water from the dams on Lake Julius and Lake Moondarra for treatment prior to distribution in Mount Isa. Small quantities of groundwater (<5 ML/year) may be pumped from a single bore for stock and domestic use. Where larger amounts of groundwater are required (tens to hundreds of megalitres per year), water may be pumped from a borefield consisting of multiple connected production bores. Such applications include town and community water supplies and irrigated agriculture. A water licence is required for some water uses, such as water use for town and community water supply or applications by industry. Other applications, such as stock and domestic use, may or may not require a licence. This will depend upon the proposed location and magnitude of water take and whether it occurs within a water plan area or could interfere with a watercourse, lake or spring (Queensland Government, 2016). In some areas of the catchments, water use is under a water plan – each plan covers a different extent and plan areas may overlay another plan area (Figure 2-19). Surface water plans will overlay the Water Plan (Gulf) 2007 area (Figure 2-19). Groundwater plans may overlay the Great Artesian Basin and Other Regional Aquifers (GABORA) Plan area. The GABORA Water Plan manages groundwater sources from multiple aquifers hosted in different geological units and within different groundwater sub-areas (Figure 2-19). In 2018, the Queensland Water Act 2000 was changed to formally recognise the importance of water resources to Aboriginal and Torres Strait Islander Peoples. It required new and replacement water plans to explicitly state ‘cultural outcomes’ as distinct from social, economic and environmental outcomes. Water plans can include strategies for monitoring and reporting on the achievement of cultural outcomes. For example, the Water Plan (Gulf) 2007 (Queensland Government, 2007) includes 30,550 ML as an Indigenous reserve. Surface water entitlements Surface water licences with a volumetric entitlement occur at a variety of locations and from a variety of sources across the Southern Gulf catchments (Figure 2-19). Currently, 27 unsupplemented surface water licences with a volumetric entitlement have been granted across the Southern Gulf catchments. These licenses have been granted for a combination of uses, including agriculture and aquaculture, across various parts of the catchments. They have a combined total of about 38,000 ML/year (38 GL/year) (Figure 2-19). The largest entitlements (i.e. between 1000 and 8000 ML/year) have been granted for use in agriculture. Some moderate entitlements (between 400 and 1000 ML/year) have been granted for town and community water supply at Mount Isa, Gregory and Kajabbi (Figure 2-19). Much smaller surface water entitlements (<50 ML/year), are associated with stock use (Figure 2-19). There are also supplemented water entitlements supplied by Lake Julius (48.85 GL) and Lake Moondarra (26.3 GL). These entitlements are used for Mount Isa town water supply and industrial use, as well supply to Cloncurry and Ernest Henry Mine via the North West Queensland Water Pipeline from Lake Julius. Use of these entitlements historically has been low, over the 2017–18 to 2021–22 water years (1 September to 31 August), 11% to 29% of authorised entitlements from Lake Julius were used, and 52% to 66% from Lake Moondarra (Queensland Department of Regional Development, Manufacturing and Water, 2023). The Water Plan (Gulf) 2007 also includes a number of unallocated water reserves in the Southern Gulf catchments. There are Indigenous reserves (Indigenous unallocated water) in the Morning Inlet (50 ML), Settlement Creek (1.5 GL) and Gregory River (1 GL) catchments. There is 1.1 GL for any purpose reserved for the East Leichhardt Dam and 4.4 GL general purpose reserve in the Nicholson River subcatchment. State strategic reserves are 5 GL in the Gregory River, 15 GL in the lower Leichhardt River, 1 GL in Morning Inlet, 4.282 GL in the Nicholson River and 1 GL in Settlement Creek, for a total of 34.3 GL of reserves for future water use in the Southern Gulf catchments. Groundwater entitlements Groundwater licences with a volumetric entitlement also occur at a variety of locations and from a variety of sources for different uses across the catchments. Currently 13 groundwater licences with a volumetric entitlement have been granted for a variety of applications with a combined total of about 3.5 GL/year. The largest entitlements (150 to 1400 ML/year) are associated with industrial use in mining with the water sourced from various aquifers hosted in the Paradise Creek Formation and the Currant Bush and Thorntonia limestones (Figure 2-19). Two licensed entitlements of approximately 100 ML/year have been granted for town and community water supplies at Burketown and Gununa (Mornington Island). Both licences have been granted for groundwater sources from the Gilbert River Formation of the Great Artesian Basin (Figure 2-19). The smallest groundwater licences (<100 ML/year) have been granted for a variety of industrial and agricultural uses with groundwater sourced from a variety of aquifers hosted in different geological units (Figure 2-19). The Century Zinc Mine, located about 15 km to the south-east of Lawn Hill, was Australia’s largest open-pit zinc mine before its closure in 2016. It used to de-water part of the Cambrian Limestone Aquifer (CLA) hosted in the Thorntonia Limestone that overlies zinc deposits hosted in the Proterozoic Lawn Hill Formation. When fully operational, the mine was reported to be extracting about 19 GL/year of groundwater in the early 2000s and about 10 GL/year in the mid-2010s. Currently, less than 1 GL/year of groundwater is being extracted at the site. The cessation in de-watering at the site is likely to have resulted in recovery of groundwater levels and storage in the CLA around the site. This may also include an onset of increased discharge from the aquifer to Lawn Hill Creek. However, the timescales for changes in groundwater flow are likely to be in the order of tens of years or longer, and further investigation would be required to confirm this. For more information on groundwater resources of the Southern Gulf catchments, see the companion technical report on groundwater characterisation (Raiber et al., 2024). Figure 2-19 Location, type and volume of annual licensed surface water and groundwater entitlements of the Southern Gulf catchments Supplemented water entitlement from Lake Moondarra (26.3 GL/y) and Lake Julius (48.85 GL/y), and unallocated reserves provided for in the Water Plan (Gulf) 2007 (34.3 GL/y in total), are not shown. Currently there are no active groundwater or surface water licences in the NT portion of the Southern Gulf catchments. Data source: Spatial dataset of the location and attributes for water licences and permits across Queensland sourced from the Queensland Department of Regional Development, Manufacturing and Water (2023) Water licenses map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\11_Groundwater\4_S_Gulf\1_GIS\1_Map_docs\1_Export\Gr-S-519_WaterLicences_v07.png For more information on this figure please contact CSIRO on enquiries@csiro.au Community infrastructure The availability of community services and facilities in remote areas can play an important role in attracting or deterring people from living in those areas. Development of remote areas therefore also needs to consider whether housing, education and healthcare are sufficient to support the anticipated growth in population and demand, or to what extent these would need to be expanded. Like most remote parts of Australia, there are limited primary health resources in the Southern Gulf catchments apart from in the largest population centre Mount Isa. The Mount Isa hospital has 80 beds and is a Queensland Level 4 (Clinical Services Capability Framework) Specialist Service Base Hospital delivering moderately complex services. Telehealth and specialist outreach services are provided from Mount Isa to remote hospital and health service facilities in the Assessment area. General practitioners and allied health professionals provide most primary healthcare in Mount Isa. The Southern Gulf catchments are serviced by the national primary health network (PHN). Australia is divided into 31 PHNs: one of these covers the whole of the NT and in Queensland the area is covered by the Western Queensland PHN. These PHN regions are divided into districts. In the NT, the Katherine Health Service District (HSD) (also known as the Big Rivers Region) and the Barkly HSD provide health services to remote communities and properties in the NT part of the Southern Gulf catchments. There are no hospitals inside the NT section of the Southern Gulf catchments. The nearest healthcare resource is Robinson River Community Health Centre, a nurse- led clinic, approximately 100 km north of the boundary of the catchments. The Queensland North West Hospital and Health Service at Mount Isa works closely with local hospital and clinic networks in smaller communities to provide remote health services. There are three hospitals inside the boundaries of the catchments: Burketown (Level 1), Doomadgee (Level 2) and Mornington Island (Level 2). They provide low-complexity care services and specialist visiting services including paediatrics, dietetics, oral health and speech therapy. Gidgee Healing Aboriginal Medical Service provides primary and community healthcare in Doomadgee and on Mornington Island. Three Queensland hospitals located close outside the boundaries of the catchments provide health services: Camooweal (Level 1), Cloncurry (Level 1) and Normanton (Level 2). The Royal Flying Doctor Service also covers the region, providing weekly general practitioner and fortnightly child health clinics to some communities and properties. The mining town of Mount Isa has all the facilities of a large rural town. It is the central hub for education in the Southern Gulf catchments, with three public schools totalling 1240 FTE enrolled students and 129.4 teachers (FTE) in 2022 (Table 2-7). Delivering education to the smaller communities are three schools, Doomadgee, Burketown and Mornington Island, which are all in the Queensland part of the catchments. A total of 577.2 (FTE) students are enrolled in these schools with 60.8 (FTE) teachers. There are a further four schools just outside the Southern Gulf catchments: Camooweal, Cloncurry and Normanton in Queensland and Robinson River in the north of the NT part of the catchments. Mount Isa School of the Air, with 176 students (FTE), also covers the properties and communities in the Assessment area. Table 2-7 Schools servicing the Southern Gulf catchments For more information on this figure or table please contact CSIRO on enquiries@csiro.au †FTE = full-time equivalent Source: ACARA (2023) (data presented with permission) At the time of the 2021 Census, around 19% of private dwellings were unoccupied, around double the Queensland and national means for unoccupied dwellings (Table 2-8). This suggests that the current pool of housing may have some capacity to absorb small future increases in population. Table 2-8 Number and percentage of unoccupied dwellings and population for the Southern Gulf catchments For more information on this figure or table please contact CSIRO on enquiries@csiro.au †Weighted averages of scores for SA2 regions falling wholly or partially within the boundaries of the catchments. Source: ABS (2021a) Census data Part IIAgriculturaldevelopment options Part IIanalyses the farm-scale performance ofpotential irrigated agricultural development options and covers theagronomic principles involved in implementing them. Chapter3provides background information on tropical agronomy including the environmental factorsaffecting crop performance (climate, soils, land suitability,water resources), the range ofpotential crop options and crop management considerations. Chapter4describes the approach used forcrop modellingand other quantitativeanalyses ofaset of 19possible crop options fortheSouthern Gulf catchmentsand the methodsused to estimatetheir potential performance (interms of yields, water use and farm grossmargins). Chapter5presents theresults ofthe farm-scale analyses, uses narrative risk analyses to illustrateopportunities and challenges for establishing viablenewenterprises, and interpretsthe practical implications of the information provided in Part II forthetypesof cropping systems that could be fine-tuned tothe environments of theSouthern Gulf catchments. Part III analyses the scheme-scale viabilityof irrigated development options and economicconsiderations beyond thefarm gatethat wouldbe required for those developmentsto succeed. Cotton under centre pivot irrigation Source:CSIRONathan Dyer - 3 Biophysical factors affecting agricultural performance 3.1 Climate Climate is a key factor in determining the productivity of agricultural and pastoral production systems. While temperature, solar radiation, sunlight and rainfall influence the rate of crop growth, extreme weather events such as floods, hail, drought or heat waves have additional episodic, and sometimes catastrophic, effects on agricultural production systems. Crop water use is determined by the interaction between atmospheric evaporative demand (controlled by air temperature, vapour pressure deficit (VPD) and wind speed), crop canopy and root system capacity, and the amount of water stored in the soil. The climate of the catchment of the Southern Gulf rivers is discussed in detail in the companion technical report on climate (McJannet et al., 2023), and briefly summarised below (Figure 3-1; Figure 3-2). The Southern Gulf catchments have a hot and arid climate that is highly seasonal with an extended dry season between May and October. The Southern Gulf catchments receive, on average, 602 mm of rain per year, 94% of which falls during the summer wet season (1 November to 30 April). Mean daily temperatures and potential evaporation are high relative to other parts of Australia. On average, annual potential evaporation is approximately 1900 mm; however, the annual net evaporative losses (annual evaporation minus rainfall) are large, approximately 1300 mm. Overall, the climate of the Southern Gulf catchments generally suits the growing of a wide range of crops, though in most years rainfall would need to be supplemented with irrigation. The variation in rainfall from one year to the next is moderate compared to elsewhere in northern Australia yet is high compared to other parts of the world with similar mean annual rainfall. The length of consecutive dry years is not unusual in the Southern Gulf catchments and the intensity of the dry years is similar to many centres in the Murray–Darling Basin and east coast of Australia. Between 1969–70 and 2021–22, tropical cyclones affected parts of the Southern Gulf catchments once in 36% of cyclone seasons and twice in 4% of seasons. Future climate projections for the Southern Gulf catchments suggest 44% of global climate models (GCM-PS) project a drier future (decrease in mean annual rainfall by more than 5%), 16% project a wetter future (increase in mean annual rainfall by more than 5%) and 40% little change in rainfall. Each of the key climate parameters that control plant growth and crop productivity are discussed in turn under the subheadings below, although it should be noted that they are interrelated and never act in isolation. Throughout this section, the tropical monsoonal climate of the Southern Gulf catchments is contrasted against that of more temperate southern agricultural areas (using Griffith, NSW, as an example), to highlight how different cropping systems in northern Australia are to those where most of the country’s farming expertise resides. 3.1.1 Rainfall While rainfall in the Southern Gulf catchments largely occurs during the summer wet season, variability in rainfall is high, with long-term rainfall totals over a 14-day period varying by over 170 mm between seasons at Gregory (Figure 3-1). Irrigation can be used to supplement rainfall in the wet season when below average rainfall is experienced, and also facilitate cropping during the dry season (winter months) when sufficient irrigation water is available. (a) Rainfall, and number of days per fortnight daily rainfall exceeds 5 mm (b) Maximum temperature, and number of days per fortnight minimum temperatures are above 35 °C and 40 °C thresholds (c) Minimum temperature, and number of days per fortnight minimum temperatures are below 10 °C and 5 °C thresholds Figure 3-1 Long-term fortnightly climate variation in (a) rainfall, (b) maximum and (c) minimum temperatures for the historical climate (1890 to 2015) at Gregory Whiskers on box plots show 10% and 90% exceedance values. Source: Data sourced from SILO website Queensland Government website (Jeffrey et al., 2001) Rainfall graph \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\Gregory_Climate_report_139251865_1889-01-01_to_2022-08-31\Gregory_Climate_report_stats_graphs.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 024680501001502001234567891011121314151617181920212223242526raindays > 5mmFortnightly rainfall (mm) Max temperature graph \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\Gregory_Climate_report_139251865_1889-01-01_to_2022-08-31\Gregory_Climate_report_stats_graphs.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au For more information on this figure please contact CSIRO on enquiries@csiro.au (a) Solar radiation, and number of days per fortnight radiation is below 20 and 15 MJ per square metre per day thresholds (b) Relative humidity (RH), and number of days per fortnight RH is below 40% while temperatures exceed 35 C (c) Vapour pressure deficit, and number of days per fortnight RH is above 40% while temperatures exceed 35 C Figure 3-2 Long-term fortnightly climate variation in (a) solar radiation, (b) relative humidity (RH) and (c) vapour pressure deficit (VPD) under the historical climate (1890 to 2015) at Gregory Whiskers on box plots show 10% and 90% exceedance values. Source: Data sourced from SILO website Queensland Government website (Jeffrey et al., 2001) For more information on this figure please contact CSIRO on enquiries@csiro.au For more information on this figure please contact CSIRO on enquiries@csiro.au For more information on this figure please contact CSIRO on enquiries@csiro.au Wet-season rainfall is associated with the monsoon trough, tropical lows or intense storms, which also have implications for crop growth and management. The former can reduce crop yield potential through warm night temperatures and lower solar radiation (due to prolonged cloud cover) as shown for the wet season (December to March) in the Gregory example (Figure 3-2). On the other hand, intense storm events produce strong winds, which have the potential to physically damage crops. Excessive rainfall can also complicate the management of agricultural land, for example in delaying farm operations, or the loss of soil nutrients such as nitrogen through leaching, runoff and denitrification. Waterlogging can also reduce crop growth on clay soils and reduce machine access to fields on heavier soils found in low alluvial plains and floodplains of the Southern Gulf catchments. The mean annual rainfall, averaged over the Southern Gulf catchments, is 602 mm (McJannet et al., 2023). Annual rainfall is highest in the northern part of the catchments, which receive more active monsoon episodes during the wet season. Rainfall is lowest in the most southerly part the catchments. Mean annual rainfall is about 780 mm at Westmoreland in the north-west, 540 mm at Gregory and 577 mm at Kamilaroi in the central region, and 420 mm at Gallipoli in the south. The highest monthly rainfall totals typically occur during January and February. While daily wet-season rainfall is strongly correlated with the Australian Monsoon Index, seasonal rainfall variability experienced in the Southern Gulf catchments is strongly influenced by Indonesian sea surface temperatures and El Niño–Southern Oscillation indices (Rogers and Beringer, 2017). Year-to-year variation in the timing and amount of rainfall affects the amount of water available for irrigation due to fluctuations in stream flows and the consequent opportunities for water harvesting. Irrigated cropping options need to consider the timing and amount of water available. 3.1.2 Evaporation Evaporation is the ‘drying’ process by which water is lost from open water, plants and soils to the atmosphere. It has become common usage to also refer to this as evapotranspiration. Transpiration is ‘that part of the total evaporation that enters the atmosphere from the soil through the plants’ (Shuttleworth, 1993). The rate and amount of water evaporated from the soil surface is influenced by surface shading by the crop canopy or surface stubble residues and soil water in the top soil layers. Crop transpiration is the product of not only solar radiation but also air temperature, air humidity and wind that affect the vapour pressure gradient between plant leaf stomata and the atmosphere (see Section 3.1.5), along with crop factors such as the height and leaf area of the crop, the extent of the root system and the amount of water in the soil. Evaporation losses from water storages (dams and ringtanks) and delivery systems (diversion streams and channels) need to be considered in determining the overall water availability to meet crop water demand. The mean annual potential evaporation (PE) for the Southern Gulf catchments is 1900 mm (McJannet et al., 2023). Seasonal and inter-annual variation in PE is illustrated for Gregory (Figure 3-3). The mean annual rainfall deficit (mean annual net evaporative water loss from potential open storages) at Gregory is about 2100 mm (McJannet et al., 2023). (a) Monthly potential evaporation (b) Annual potential evaporation Figure 3-3 Historical potential evaporation (PE) in the Southern Gulf catchments at Gregory for (a) monthly PE (range is the 20th to 80th percentile monthly PE) and (b) time series of annual PE (line is the 10-year running mean) Source: Data sourced from SILO website Queensland Government website (Jeffrey et al., 2001) 3.1.3 Radiation Shortwave radiation from sunlight influences plant growth through the process of photosynthesis converting atmospheric carbon dioxide into carbohydrates within the plant. The potential amount of solar radiation intercepted by the crop is determined by latitude (which influences day length), time of year, cloudiness, atmospheric transparency and scattering, and crop canopy characteristics for the growth stage. Solar radiation during the summer months (January to March) is slightly supressed in the Southern Gulf catchments due to increased cloud cover associated with the monsoon trough over northern Australia (Figure 3-4a). While long-term mean radiation during the wet season is reduced to less than 25 MJ per square metre per day from mid-January, radiation levels during the dry season remain high compared to agricultural regions in southern Australia due to the latitude of Southern Gulf catchments. Figure 3-4a demonstrates how differences in latitude between the Southern Gulf catchments (tropical latitude, about 18°S) and Griffith in southern NSW (subtropical latitude 34.3°S) affect monthly solar radiation. For the Gregory example, solar radiation from April to October remained above 18 MJ per metre square per day, much higher than the radiation experienced during the same period at Griffith (Figure 3-4a), indicative of the subtropical and temperate patterns of radiation in the southern parts of Australia where most crop production occurs. Farmers in the Southern Gulf catchments can maximise crop yields by successfully managing the time of sowing and growing season length to maximise peak radiation intercepted by the crop (March–April and August–September) while avoiding the temperature extremes experienced in October and November. For more information on this figure please contact CSIRO on enquiries@csiro.au 050100150200250300JFMAMJJASONDPotential evaporation (mm) RangeMedianMean https://csiroau.sharepoint.com/:x:/r/sites/RoWRAAgEconomics/Shared%20Documents/General/Crop%20Yields/SoWRA%20APSIM/Climate/Gregory%20Downs%20outstation_29100_evaporation.xlsx?d=wb597c08cf02941e891d61e51f0a89856&csf=1&web=1&e=naUpWn For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au (a) Mean daily solar radiation (b) Mean daily vapour pressure deficit Figure 3-4 Monthly mean daily (a) solar radiation and (b) vapour pressure deficit for four locations in the Southern Gulf catchments (Westmoreland, Kamilaroi, Gregory and Gallipoli: latitude 17.3–19°S) and Griffith (subtropical: latitude 34.3°S) 3.1.4 Temperature Temperature influences all plant physiological processes and plays a role in determining the length of crop development phases. The optimal temperature for plant growth and therefore maximum individual crop productivity varies between crop species. Temperature extremes at sensitive phenological stages can adversely affect crop productivity. Plant species have differing temperature thresholds for optimum growth and differing responses during periods of extreme high or low temperature. High plant canopy temperatures reduce the efficiency of photosynthesis via increased respiration (particularly at night) and photorespiration, the latter affecting C3 crops (e.g. rice, soybean, mungbean, sesame (Sesamum indicum), cotton, forage legumes). For northern Australia, the highest temperatures generally occur during the months of October to December as shown for the Southern Gulf catchments (Figure 3-5), where the long-term mean daily maximum temperature can exceed 36 °C and night temperature (i.e. minima) exceed 24 °C. High temperature effects (both day and night) on plant photosynthesis are exacerbated by high humidity and low solar radiation. (a) Mean daily maximum temperature (b) Mean daily minimum temperature Figure 3-5 Monthly mean daily (a) maximum and (b) minimum daily temperatures for four locations in the Southern Gulf catchments (Westmoreland, Kamilaroi, Gregory and Gallipoli: latitude 17.3–19°S) and Griffith (subtropical: latitude 34.3°S) Daily solar radiation graph \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Daily vapour pressure deficit graph \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Daily Max temp graph \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Daily min temp graph \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 3-5 shows that while the amplitude of annual mean monthly temperatures experienced in the Southern Gulf catchments are smaller than those further south in Griffith, the differences in mean monthly maximum temperatures between the two locations are greatest between August and October. The onset of the wet season (December to March) generally coincides with periods of hot temperatures (slightly cooler than the pre-monsoonal build-up), lower solar radiation and higher humidity/lower VPD (Figure 3-4). When high temperatures occur at times that crops are growing rapidly and soil water profiles are depleted, the cooling effects of transpiration are diminished and crop canopy temperatures rise. Under such stress conditions, photosynthesis is reduced and plant tissue damage can occur. Collectively these physiological effects are often referred to as ‘water stress’. Prior to the onset of summer rains, low soil water, higher air temperatures and high solar radiation combine to heat soils, particularly those low in vegetative cover. High soil temperatures can reduce seedling emergence and crop establishment. For an irrigated crop, higher temperatures induce higher evaporative demand and increase evapotranspiration, resulting in a higher irrigation requirement to achieve maximum production. 3.1.5 Vapour pressure deficit Relative humidity (RH), the amount of water vapour in the air as a proportion of the potential amount of water the air can hold for a given air temperature and altitude, is well understood. But VPD is a more accurate measurement of how plants respond to changes in humidity and temperature. VPD is the difference between the current partial pressure of water vapour in the atmosphere and the amount of water vapour that could be held at saturation (at 100% RH at the current temperature). At higher VPDs, the vapour pressure gradient between plants and the atmosphere is stronger, which drives higher rates of transpiration and water use by crops (Rashed, 2016). It is the combination of VPD and high air temperature that reduces the ability of plants to transpire and regulate temperature. High temperatures and low VPD (particularly at night) are as detrimental to canopy temperature regulation as high temperatures and high VPD. During periods of high temperature, supplementary irrigation may assist in reducing plant stress but is of limited value during periods of high VPD. The long-term mean RH for Gregory fluctuates between 30% in the dry season and slightly above 60% in the wet season (Figure 3-2). The occurrence of periods of high humidity also influences the development of many plant diseases. Irrigated crops can be exposed to high levels of humidity that can favour disease infection during the wet season and during cooler nights in the dry season. Lower RH in the spring build-up to the monsoonal season (September to November) correlates with an increase in VPD and higher maximum and minimum temperatures that would require additional irrigation resources to meet higher surface evaporation and transpiration loss (Figure 3-2; Figure 3-4b). 3.1.6 Wind speed Wind can be both beneficial and harmful to crop productivity. It can aid the process of pollination and is particularly important in the development of fruit and seed from wind-pollinated flowers. However, strong winds can cause excessive water loss through transpiration, which can cause crops and trees to wilt. In strong winds, tall crops, particularly crops that are covered with water from rain or spray irrigations, may lodge (fall over), leading to lower photosynthetic potential and making crops more difficult to harvest. Combined with other factors, winds can be particularly harmful; for example, wind-blown sand particles can damage vegetative surfaces. Destructive winds and potential flooding associated with tropical cyclones pose a significant threat, particularly to tree crops. 3.1.7 Cyclones Cyclones are a significant risk to any above-ground infrastructure (sheds, irrigation pivots, etc.) and to tree crops with long life cycles. Tropical cyclones and tropical lows also contribute a considerable proportion of total annual rainfall in the Southern Gulf catchments, but the actual amount is highly variable from one year to the next (see companion technical report on climate (McJannet et al., 2023)). There is a reasonably high risk of cyclones in the Southern Gulf catchments from November to April, predominantly in the coastal part of the district and particularly in La Niña years (Figure 3-6). For the 53 tropical cyclone seasons from 1969–70 to 2021–22, 60% of seasons experienced no tropical cyclones, 36% experienced one tropical cyclone, and 4% experienced two cyclones in part of the Southern Gulf catchments (McJannet et al., 2023). Figure 3-6 Mean annual number of tropical cyclones in Australian for (a) El Niño years and (b) La Niña years Adapted by Petheram and Bristow (2008) from Bureau of Meteorology cyclone mBOM website . 3.1.8 Future climate Australia’s climate has been progressively warming since the early 1900s (CSIRO and BoM, 2015). Mean overnight minimum temperatures have increased by 1.1 °C and mean daily maximum temperatures by 0.8 °C. Northern Australia, including the Southern Gulf catchments, has experienced a mean temperature increase of between 0.5 °C and 1.0 °C since 1910. Temperatures are expected to increase in the future, resulting in an increased number of extremely hot days. Tropical cyclones in la nina and el nino years http://www.bom.gov.au/climate/maps/averages/tropical-cyclones/ For more information on this figure please contact CSIRO on enquiries@csiro.au While winter rainfall has declined by 19% in the south-west of the country, parts of northern Australia have experienced above average increases in rainfall since the 1970s. Future climate projections of rainfall for northern Australia do not show a clear trend, with some models suggesting decreases and others projecting increases in rainfall. An analysis of 21 downscaled GCM-PSs for the Southern Gulf catchments gave a consensus result that mean annual rainfall in the Southern Gulf catchments could change by less than 5% under a 2.2 °C warming scenario, with slightly more models projecting greater than 5% wetting (29%) than greater than 5% drying (19%) (McJannet et al., 2023). The same analysis projected mean annual PE to increases by about 3% to 10% in the Southern Gulf catchments. In addition to changes in temperature, evaporation and rainfall as a consequence of increased greenhouse gas emissions, agricultural production will also be affected directly by elevated atmospheric CO2 concentrations. The direct impacts of elevated atmospheric CO2 concentrations on crop physiological processes of photosynthesis and leaf stomatal conductance are well- documented from free air CO2 enrichment experiments (e.g. Hendrey et al., 1993; Tubiello et al., 2007). In the absence of temperature stress, elevated CO2 improves water-use efficiency of crops and grasses by regulating a stomatal closure response in the plant to increase intercellular CO2 (Parry et al., 2004) and by the passive effects of increasing CO2 relative to vapour gradients between substomatal spaces and the atmosphere. One anomaly of projected increases in mean temperature associated with elevated greenhouse gases is temperature-induced acceleration of crop development as a result of an increase in the rate of thermal time accumulation. While overall crop yields may decrease in response to increased daily temperature, the rate of decline may be mitigated due to a shortening of the vegetative and grain-filling periods, which result in phenological development and maturation occurring earlier and possibly within a more favourable climate period. The timing and use of supplementary irrigation will also have a role in reducing the severity of temperature-induced stress in crops. 3.2 Soils and land suitability 3.2.1 Soils Soils play a vital role in enabling crop production by providing a medium for physical support, nutrient supply and cycling (including associated soil organic matter and soil biota), and water storage and supply. The companion technical report on digital soil mapping and land suitability (Thomas et al., 2024) classified soils of the Southern Gulf catchments into soil generic groups (SGGs) (Figure 3-7; Table 3-1). The ten SGGs provide a means of aggregating soils with broadly similar properties and management considerations. Each of the SGGs has a different potential for agriculture, some with almost no potential, such as the shallow and/or rocky soils (e.g. SGG 7, Table 3-1) and some with moderate to high potential (e.g. SGG 9, Table 3-1) depending on other factors such as flooding and the amount of salt in the profile. Figure 3-7 The soil generic groups (SGGs) of the Southern Gulf catchments produced by digital soil mapping The inset map shows the data reliability, which for SGG mapping is based on the confusion index as described in the companion technical report on digital soil mapping and land suitability (Thomas et al., 2024). Soil generic group map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\3_Land_suitability\4_S_Gulf\1_GIS\1_Map_docs\1_Exports\LL-S-503_SGG_v2_Arc10_8.png For more information on this figure please contact CSIRO on enquiries@csiro.au Table 3-1 Soil generic groups (SGGs), descriptions, management considerations and correlations to Australian Soil Classification (ASC) for the Southern Gulf catchments Figure 3-7 shows the distribution of the SGGs within the Southern Gulf catchments while Table 3-2 provides the areas, in hectares, within the catchments. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: Companion technical report on digital soil mapping and land suitability (Thomas et al., 2024) The Southern Gulf catchments contain soils from nine of the ten SGGs; peaty soils (SGG 5) are not found. Of those nine SGGs found in the catchments, only two of them occupy more than 10% of the area and together these soils represent 78% of the catchments (Table 3-2). The two SGGs that make up this 78% are the shallow and/or rocky soils, which are associated with uplands and plateaux (SGG 7, 55.9%), and cracking clay soils found on the Barkly Tableland and Armraynald Plain (SGG 9, 22.5%). Brown, yellow and grey sandy soils (SGG 6.2) make up 7.6% of the catchments and seasonally or permanently wet soils (SGG 3) another 6.0%, both being common on the Doomadgee Plain. Table 3-2 Area and proportions covered by each soil generic group (SGG) for the Southern Gulf catchments Areas without parentheses show mainland hectarages, whereas areas in parentheses are for SGGs on the Wellesley Islands. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au na = not applicable, not found in the Southern Gulf catchments Source: Companion technical report on digital soil mapping and land suitability (Thomas et al., 2024) 3.2.2 Land suitability The overall suitability of a location for a particular land use is determined by a range of attributes. Examples of these attributes include climate at a given location, slope, drainage, permeability, plant available water capacity (PAWC), pH, soil depth, surface condition and texture. From these attributes a set of limitations are derived, which are then considered against each potential land use. Note that the use of the term suitability in the Assessment refers to the potential of the land for a specific land use such as furrow-irrigated cotton. The companion technical report on digital soil mapping and land suitability (Thomas et al., 2024) provides a complete description of the land suitability assessment framework and the material presented below is summarised from that report. The framework aggregated individual crops into a set of 21 crop groups that have shared land suitability constraints. Land suitability was then determined for 58 land use combinations of crop group × season × irrigation type (including rainfed cropping). Thomas et al. (2024) calculated the overall suitability for a particular land use by considering the set of relevant attributes at each location and determining the most limiting attribute among them. This most limiting attribute then determined the overall land suitability classification on a scale from Class 1 (‘suitable with negligible limitations’) to Class 5 (‘unsuitable with extreme limitations’) for that particular combination of crop group × season × irrigation type. Note that this classification explicitly excludes consideration of flooding, risk of secondary salinisation, or availability of water. The intention is that such risks would be considered separately, along with further detailed soil physical, chemical and nutrient analyses before planning any developments at scheme, enterprise or property scale. Caution should therefore be employed when using these data and maps at fine scales. In order to provide an aggregated summary of the land suitability products, an index of agricultural versatility was derived for the Southern Gulf catchments (Figure 3-8). Versatile agricultural land was calculated by identifying where the highest number of 14 selected land use options were mapped as being suitable (i.e. suitability classes 1 to 3). Qualitative observations on each of the areas mapped as ‘A’ to ‘F’ in Figure 3-8 are provided in Table 3-3. Figure 3-8 Agricultural versatility index map for the Southern Gulf catchments High index values denote land that is likely to be suitable for more of the 14 selected land use options. The map also shows areas of interest (A to F) from a land suitability perspective, discussed in Table 3-3. Note that this map does not take into consideration flooding, risk of secondary salinisation or availability of water. Source: Companion technical report on digital soil mapping and land suitability (Thomas et al., 2024) Versatile agricultural land \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\1_Exports\Se-S-515_AgVers14_PotDev_v1_10_8.png For more information on this figure please contact CSIRO on enquiries@csiro.au Table 3-3 Qualitative land evaluation observations for locations in the Southern Gulf catchments (A to F) shown in Figure 3-8 Further information on each soil generic group (SGG) and a map showing spatial distribution can be found in Thomas et al. (2024). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: Companion technical report on digital soil mapping and land suitability (Thomas et al., 2024) 3.3 Irrigation systems 3.3.1 Irrigation efficiency and pumping costs Water that is captured and stored from rivers must be transported to and applied in the field where it is needed. This conveyance of water can result in losses from leakage, seepage, evaporation, outfall, unrecorded usage and system filling. Water from groundwater is usually extracted locally, and transport losses are reduced, but losses can still occur during application. Losses can occur at all points along the delivery system depending on system design, and across Australia the mean water conveyance efficiency from the river to the farm gate has been estimated to be 71% (Marsden Jacobs Associates, 2003). On-farm losses occur between the farm gate and delivery to the field and usually take the form of evaporation and seepage from on-farm storages and delivery systems. Even in irrigation developments where water is delivered to the farm gate via a channel or in groundwater systems, many farms still have small on-farm storages. These on-farm storages enable the farmer to have a reliable supply of irrigation water with a higher flow rate than might otherwise be possible from channels and may also be used to recycle tailwater. Several studies have been undertaken in southern Australia of on-farm distribution losses. Meyer (2005) estimated an on-farm distribution efficiency of 78% in the Murray and Murrumbidgee regions, while Pratt Water (2004) estimated on-farm efficiency to be 94% and 88% in the Coleambally Irrigation Area and the Murrumbidgee Irrigation Area, respectively. In these irrigation areas, measured channel seepage losses in both supply channels and on-farm channels were generally less than 5% (Akbar et al., 2013). Estimates of channel seepage losses in the Burdekin River Irrigation Area range from 2% to 22% (Williams, 2009). Once water is delivered to the field, it needs to be applied to the crop using an irrigation system. In-field application efficiency is the percent of water applied that is available for crop uptake. Efficiency losses occur when applied water evaporates, runs off the field or drains below the root zone. The application efficiency of irrigation systems typically varies between 60% and 90%, with more efficient pressurised systems being more expensive. There are three types of irrigation systems that can potentially be applied in the Southern Gulf catchments: surface irrigation, spray irrigation and micro irrigation (Table 3-4). Irrigation systems need to be tailored to the soil, climate and crops that may be grown, and matched to the availability and source of water for irrigation. System design also needs to consider investment risk in irrigation systems as well as likely returns, degree of automation, labour availability, and maintenance and operation costs, including pumping costs (Table 3-5). Typically spray and micro irrigation systems are more suitable for permeable or well-drained soils, whereas less expensive surface systems are suitable predominantly on clay soils. Surface irrigation systems have the lowest pumping costs, particularly where they can mainly rely on gravity to distribute water. Table 3-4 Details of irrigation systems applicable for use in the Southern Gulf catchments Adapted and updated from Ash et al. (2018a, 2018b), Hoffman et al. (2007), Raine and Bakker (1996) and Wood et al. (2007). Updated to December 2023 dollar values. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 3-5 Pumping costs by irrigation operation Adapted and expanded from Culpitt (2011) with costs calculated from first principles based on assumptions of $1.58/L for diesel ($2.07/L less $0.488/L rebate), $0.48/kWh for electricity, and diesel consumption of 0.25 L/kWh equivalent. Bore pumping is the cost to lift water to the surface per m TDH (total dynamic head) required, where the TDH and maximum flow rate depend on the nature of the aquifer. 1 m TDH = 9.8 kPa. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 3.3.2 Surface irrigation systems Surface irrigation encompasses basin, border strip and furrow irrigation, as well as variations such as bankless channel systems. In surface irrigation, water is applied directly to the soil surface with structures used to direct water across a field. These structures are often individual crop rows (furrows) but can be up to tens of metres wide (basins). Gravity is used to propel the water across the paddock, with levelling often required to increase the uniformity and efficiency of application. Generally, fields are laser levelled to increase the uniformity of applied water and allow adequate surface drainage from the field. The uniformity and efficiency of surface systems are highly dependent on the system design and soil properties, timing of the application of irrigation water, and the skill of the individual irrigator in operating the system. Mismanagement can severely degrade system performance and lead to systems that operate at poor efficiencies. Surface irrigation can generally be adapted to almost any crop and has a lower capital cost compared with alternative systems (Table 3-4), therefore it is well-suited to broadacre crops that have lower gross margins and larger cropped areas. Surface irrigation systems perform better when soils are of uniform texture because infiltration characteristics of the soil play an important part in the efficiency of these systems. They are not so well-suited to sandy soils due to losses along the furrows. Therefore, surface irrigation systems should be designed into uniform soil management units and layouts (run lengths, basin sizes) tailored to match soil characteristics and water supply volumes. Australian agriculture is increasingly employing water inflow controls to automate surface irrigation systems. High application efficiencies are possible with surface irrigation systems that are well designed and managed, and sited on appropriate clay soils. On ideal soil types and with systems capable of high flow rates, efficiencies can be as high as 85%. On poorly designed and managed systems on soil types with high variability, efficiencies may be below 60%. The major cost in setting up a surface irrigation system is generally land grading and levelling, and construction of structures to enable storage, water capture and recycling of runoff water. Costs are directly associated with the volume of soil that must be moved. Typical earthworks volumes are in the order of 800 m3/ha but can exceed 2500 m3/ha. Volumes greater than 1500 m3/ha are generally considered excessive due to costs (Hoffman et al., 2007). Surface irrigation systems are the dominant irrigation system used throughout the world. With surface irrigation, little or no energy is required to distribute water throughout the field and this gravity-fed approach reduces energy requirements of these systems (Table 3-5). 3.3.3 Spray irrigation systems Spray irrigation systems discussed here refer specifically to lateral move and centre pivot irrigation systems. Centre pivot systems consist of multiple sprinklers spaced laterally along a series of irrigation spans, supported by a series of towers. The towers are self-propelled and rotate around a central pivot point, forming an irrigation circle of generally less than 500 m radius with areas less than 80 ha. Output volumes of individual sprinkler heads are set based on proximity to the centre of the circle so that water is applied at a constant rate per hectare across the arc covered by the pivot. The time taken for the pivot to complete a full circle can range from as little as half a day to multiple days depending on crop water demands and application rate of the system. The rotation speed of the centre pivot and flow rate of sprinklers are used to determine the irrigation application rate. Lateral or linear move systems are similar to centre pivot systems in construction but instead of moving in a circle around a central point, an entire row of sprinklers moves laterally down a rectangular-shaped field. Water is supplied by a channel or flexible hose running the length of the field. Lateral system lengths are generally in the range of 800 to 1000 m. Spray irrigation systems offer the advantage over surface systems that they can be more easily utilised on rolling topography and generally require less land forming. Furthermore, fertiliser can be applied through fertigation where crop nutrients are injected through the irrigation system rather than applied to the field. Both centre pivot and lateral move irrigation systems have been extensively used for irrigating a range of annual broadacre crops and are capable of irrigating most field crops. They are generally not suitable for tree crops or vine crops. Saline irrigation water applications in arid environments would rapidly rust standard components of the system and can lead to foliage damage (since water is sprayed from above the crop). Centre pivot and lateral move systems usually have higher capital costs but are capable of very high efficiencies of water application. Generally, application efficiencies for these systems range from 75% to 90% (Table 3-4). A key factor for deciding whether spray systems are suitable is sourcing the energy needed to operate these systems, which are usually powered by electricity or diesel depending on costs and infrastructure available. Under high groundwater pressure, centre pivots and lateral moves may be propelled using water pressure (without the need for additional energy from pumping). 3.3.4 Micro irrigation systems Micro irrigation systems use thin-walled polyethylene pipe to apply water to the root zone via small emitters spaced along the drip tube. These systems are capable of precisely applying water to the plant root zone, thereby maintaining a high level of irrigation control and water-use efficiency. Historically, micro irrigation systems have been extensively used in tree, vine and row crops, with limited applications in complete-cover crops such as grains and pastures due to the expense of these systems. Micro irrigation is suitable for most soil types and can be practised on steep slopes. There are two main types of micro irrigation systems: above-ground and below- ground (where drip tape is buried beneath the soil surface). Below-ground micro irrigation systems offer advantages in reducing evaporative losses and improving trafficability. However, below-ground systems are more expensive and require higher levels of expertise to manage. With pressurised irrigation systems such as micro irrigation, water application can be more easily controlled, and fertigation can be used to precisely apply nutrients during irrigation. For high-value crops, such as horticultural crops, where crop yield and quality parameters dictate profitability, micro irrigation systems should be considered suitable across the range of soil types and climate conditions. Properly designed and operated micro irrigation systems are capable of very high application efficiencies, with field efficiencies of 80% to 90% (Table 3-4). In some situations, micro irrigation systems also offer labour savings and improved crop quality (i.e. more marketable fruit through better water control and precision application of crop nutrients). Intensive management of micro irrigation systems, however, is critical; to achieve these benefits requires a much greater level of expertise than other traditional systems such as surface irrigation systems. Micro irrigation systems also have high energy requirements, with most systems operating at pressures of about 15 to 500 kPa (about 15 to 50 m total dynamic head (TDH)) with diesel or electric pumps most often used (Table 3-5). 3.4 Crop types 3.4.1 Broadacre crops Cereal crops Cereal production is well-established in Australia. The area of land devoted to producing grains (e.g. wheat, barley, grain sorghum, maize, oats (Avena sativa) and triticale) each year has stayed relatively consistent at about 20 million ha over the decade from 2012–13 to 2021–22, yielding over 55 Mt with a value of $19 billion in 2021–22 (ABARES, 2022). Production of cereals greatly exceeds domestic demand, and the majority (82% by value) was exported in 2021–22 (ABARES, 2022). Significant export markets exist for wheat, barley and grain sorghum, with combined exports valued at $15 billion in 2021–22. There are additional niche export markets for grains such as maize and oats. Amongst the cereals, summer crops such as grain sorghum and maize have the highest potential in the Southern Gulf catchments. These could be grown opportunistically using rainfed production, utilising stored soil water from the wet season, or in the dry season using irrigation. To grow cereal crops, farmers would require access to tillage, fertilising, planting, spraying and harvesting equipment. Harvesting is often a contract operation, and in larger growing regions other activities can also be performed under contract. Pulse crops Pulse production is well-established in Australia. The area of land devoted to production of pulses (mainly chickpea, lupin (Lupinus spp.) and field pea) each year has varied from 1.1 to 2.0 million ha over the decade from 2012–13 to 2021–22, yielding over 3.8 Mt with a value of $2.5 billion in 2021–22 (ABARES, 2022). The vast majority of pulses (93% by value) were exported in 2021–22 (ABARES, 2022). Pulses produced in the Southern Gulf catchments would most likely be exported, although there is presently no cleaning or bulk handling facility nearby, however established export ports are located at Townsville and Karumba. Many pulse crops have a relatively short growing season, meaning they are well-suited to opportunistic rainfed production, as well as irrigated production either as a single crop or in rotation with cereals or other non-legume crops. In the Southern Gulf catchments, pulse crops would most likely be suited to a production system where harvesting is in the dry season to avoid the negative impacts of rain on seed quality. Pulses are often advantageous in rotation with other crops because they provide a disease break and, being legumes, are able to fix atmospheric nitrogen into the soil, often providing carry-over nitrogen for subsequent crops. Even where this is not the case, their ability to meet their own nitrogen needs can be beneficial in reducing costs of fertiliser and associated freight. Pulses are a high-value broadacre crop (chickpeas and mungbeans have in recent years achieved prices over $1000/t) yet produce modest yields (e.g. 1 to 3 t/ha), which means freight costs represent a smaller percentage of the value of the crop compared with higher yielding, lower value cereal crops. This becomes of great importance as the distance from processing facilities and ports increases. To grow pulse crops, farmers would require access to tillage, fertilising, planting, spraying and harvesting equipment. Harvesting is generally a contract operation, and in larger growing regions other activities can also be performed under contract. The equipment required for pulse crops is the same as that required for cereal crops, so farmers intending a pulse and cereal rotation would not need to purchase extra equipment. Oilseed crops Soybean, canola and sunflowers are oilseed crops used to produce vegetable oils and biodiesel and high protein meals for intensive animal production. Soybean is also used in processed foods such as tofu. It can provide both green manure and soil benefits in crop rotations, with symbiotic nitrogen fixation adding to soil fertility and sustainability in an overall cropping system. Soybean is used commonly as a rotation crop with sugarcane in northern Queensland, although often as a green manure crop. Summer oilseed crops such as soybean and sunflower are more suited to tropical environments than winter-grown oilseed crops such as canola. Cottonseed, a by-product of cotton farming separated from the lint during ginning, is also classified as an oilseed. Cottonseed is used for animal feed and oil extraction. The area of land in Australia devoted to production of oilseeds (predominantly canola) each year has varied between 2.1 and 3.4 million ha over the decade from 2012–13 to 2021–22, yielding over 8.4 Mt with a value of $6.1 billion in 2021–22 (ABARES, 2022). The majority of oilseed production (98% by value) was exported in 2021–22 (ABARES, 2022). Canola dominates Australian oilseed production accounting for 98% of the gross value of oilseeds in 2021–22, while soybeans, sunflower and other oilseeds (including peanuts) each accounted for less than 1%. There is growing interest in soybean production, particularly from overseas companies looking to export oil to Asia. Soybean is generally grown for grain but is a useful forage crop (cut green or baled) for livestock. Soybean is sensitive to photoperiod (day length) and requires careful consideration in selection of the appropriate variety for a particular sowing window. Newer varieties will need suitability testing in the Southern Gulf catchments to ensure they match the local climate. Sunflowers are widely grown in central Queensland and in recent years they have been grown in some areas of the Ord Valley. Crop yields are known to decline from southern Australia to northern Australia due to a less suitable climate in the north. There has been little evaluation of sunflowers in northern Australia. With no oilseed processing facility in the north, soybean and sunflowers would need to be transported a significant distance until sufficient scales of production are achieved to justify the investment in processing facilities. Given both their modest yield and price, transport costs are likely to be a major constraint on profitability unless there is a well-developed supply chain into Asia. Root crops, including peanuts Root crops including peanut, sweet potatoes (Ipomoea batatas) and cassava (Manihot esculenta), are potentially well-suited to the lighter soils found across the north-western Doomadgee Plain. Root crops such as these are not suited to growing on heavier clay soils because they need to be pulled from the ground for harvest, and the heavy clay soils, such as cracking clays, are not conducive to mechanical pulling. While peanut is technically an oilseed crop, it has been included in the root crop category due to its similar land suitability requirements (i.e. the need for it to be ‘pulled’ from the ground as part of the harvest operation). The most widely grown root crop in Australia, peanut, is a legume crop that requires little or no nitrogen fertiliser and is very well-suited to growing in rotation with cereal crops, as it is frequently able to fix atmospheric nitrogen in soil for following crops. The Australian peanut industry currently produces approximately 15,000 to 20,000 t/year from around 11,000 ha, which is too small an industry to be reported separately in Australian Bureau of Agricultural and Resource Economics and Sciences statistics (ABARES, 2022). The Australian peanut industry is concentrated in Queensland. In northern Australia a production area is present on the Atherton Tablelands, and peanuts could likely be grown in the Southern Gulf catchments. For peanuts to be successful, considerable planning would be needed in determining the best season for production and practical options for crop rotations. The nearest peanut processing facilities to the Southern Gulf catchments is Tolga on the Atherton Tablelands or Kingaroy in southern Queensland. The stubble remaining after peanut harvest can be used as a high-quality supplementary feed for cattle. Most of the equipment suitable for cereal production (for planting, fertilising, spraying and harvesting) can be used for root crop production; however, specialised equipment is required to remove the roots from the ground prior to harvest. Such harvesting considerations mean that heavy clay soils are not suitable for peanut production. The residue makes good-quality hay that can be sold locally to the cattle industry, if farms have the required hay-making equipment. Industrial crops Industrial crops require post-harvest processing, usually soon after harvest in a nearby facility. Examples of industrial crops that are grown in the Australian tropics are cotton and sugarcane. Cotton Rainfed and irrigated cotton production are well-established in Australia. The area of land devoted to cotton production varies widely from year to year, largely in response to availability of irrigation water. It varied from 70,000 to 600,000 ha between 2012–13 and 2021–22; a mean of 400,000 ha/year has been grown over the decade (ABARES, 2022). Likewise, the gross value of cotton lint production varied greatly over the past decade, from $0.3 billion in 2019–20 to $5.2 billion in 2021–22. Genetically modified cotton varieties were introduced in 1996 and now account for almost all cotton produced in Australia (over 99%). Australia was the fourth largest exporter of cotton in 2022 behind the United States, India and Brazil. Cottonseed is a by-product of cotton processing and is a valuable cattle feed. Mean lint production in 2015–16 was 2.0 t/ha (ABARES, 2022). Research and commercial test farming have demonstrated that the biophysical challenges of growing cotton are manageable if cotton growing is tailored to the climate and biotic conditions of northern Australia (Moulden et al., 2006; Grundy et al., 2012; Yeates et al., 2013). Specialised harvesting and baling equipment is required for cotton production. In recent years, irrigated cotton crops achieving 10 to 12 bales/ha have been grown successfully in the Ord River Irrigation Area. Cotton trials were also conducted at Katherine in the early 2000s but, due to the length of the wet season, poorly drained soils and the economic area required to support a cotton gin, no cotton industry developed at the time. The need to grow cotton in the dry season to avoid insect pests was historically a limiting factor in regions with a long wet season, which has since been largely overcome through the introduction of genetically modified cotton; the development of new varieties have permitted wet-season production. Optimism for developing a northern Australia cotton industry, including opening of a gin near Katherine in December 2023, has followed. A large cotton farm has begun operations north on Julia Creek, and there is interest in expanding the cotton industry in the north-west Queensland region including potential ginning facilities. Other industrial crops Other industrial crops, such as tea (Camellia sinensis) and coffee (Coffea spp.), are unlikely to yield well in the Southern Gulf catchments due to climate constraints. Sugarcane requires a large area (possibly greater than 25,000 ha) with reliable annual water, as well as a central sugar milling facility. The nearest sugarcane processing facility is near Mareeba, approximately 750 km east of the boundary of the catchments. There has been interest in hemp production. Hemp is a photoperiod-sensitive summer annual with a growing season of 70 to 120 days, depending on variety and temperature. Hemp is well-suited to growing in rotation with legumes as hemp can use the nitrogen fixed by the legume crop. Industrial hemp can be harvested for grain with modifications to conventional headers, otherwise all other standard farming machinery for ground preparation, fertilising and spraying can be used. There are legislative restrictions to growing hemp in Australia and northern Australian jurisdictions (the NT, WA and Queensland) have all implemented legislation to license growing of industrial hemp to facilitate development of the industry. 3.4.2 Forage crops Forage, hay and silage are crops that are grown for consumption by animals. Forage is consumed in the paddock in which it is grown and is often referred to as ‘stand and graze’. Hay is cut, dried, baled and stored before being fed to animals, usually in yards for weaning or when animals are being held for sale. Silage production resembles that for hay, but harvested forage is stored wet in wrapped bales or covered ground pits, where anaerobic fermentation occurs to preserve the feed’s nutritional value. Silage is often used as a production feed to grow animals to meet the specifications of premium markets. Rainfed and irrigated production of fodder is well-established in Australia, with over 20,000 producers, most of whom are not specialist producers. Fodder is grown on approximately 30% of all commercial Australian farms each year, and 70% of fodder is consumed on the farms on which it was produced. Approximately 85% of production is consumed domestically. The largest consumers are the horse, dairy and beef feedlot industries. Fodder is also used in horticulture for mulches and for erosion control (RIRDC, 2013). There is a significant fodder trade in support of the northern beef industry, with further room for expansion since fodder costs comprise less than 5% of beef production costs (Gleeson et al., 2012). The Southern Gulf catchments are suited to rainfed or irrigated production of forage, hay and silage. Rainfed and irrigated hay production currently occurs in the north-west Queensland region. Most of that hay is used for feeding cattle locally. Forage crops, both annual and perennial, include sorghum, Rhodes grass (Chloris gayana), maize and Jarra grass (Digitaria milanjiana ‘Jarra’), with specific forage cultivars. If irrigated, these grass forages require considerable amounts of water and nitrogen as they can be high yielding (20 to 40 t dry matter per ha per year). Given their rapid growth, crude protein levels can drop quickly to less than 7%, reducing their value as a feed. To maintain high nutritive value (10% to 15% crude protein), high levels of nitrogen fertiliser need to be applied and in the case of hay, the crop needs to be cut every 45 to 60 days. Forage legumes are desirable because of their high protein content and their ability to fix atmospheric nitrogen in the soil. The nitrogen fixed during a forage legume phase is often in excess of requirements and remains in the soil as additional nitrogen available to subsequent crops. Annual production of legumes tends to be much lower than grasses (10 to 15 t dry matter per ha per year) but their input costs are usually much lower due to reduced nitrogen fertiliser requirements and, because they are shorter cycle crops, their total water use is often lower. Cavalcade (Centrosema pascuorum ‘Cavalcade’) and lablab (Lablab purpureus) are currently grown in northern Australia. The high crude protein content of forage legumes means that growth rates of cattle can be high. Apart from irrigation infrastructure, the equipment needed for forage production is machinery for planting; fertilising and spraying equipment is also desirable but not necessary. Cutting crops for hay or silage requires more specialised harvesting, cutting, baling and storage equipment. Hay is best stored dry, and silage requires either bunkers or large tarpaulins for covering silage above ground to maintain anaerobic conditions. Grass crops usually make better silage than legume crops because they have higher levels of sugars to aid with fermentation. Forage crops such as maize can be grown until the head just reaches the ‘milk stage’ to provide high levels of digestible energy while the leaves and stems are still green and high in protein. 3.4.3 Horticultural crops Intensive horticulture is an important and widespread industry in Australia, occurring in every state, particularly close to capital city markets. Horticultural production varied between 2.9 and 3.3 Mt/year between 2012–13 and 2021–22, of which 65% to 70% was vegetables (ABARES, 2022). Unlike broadacre crops, most horticultural production in Australia is consumed domestically. The total gross value of horticultural production was $13.2 billion in 2021–22 (up from $9.3 billion in 2012–13) of which 24% was from exports (ABARES, 2022). Horticulture is also an important source of jobs, employing approximately a third of all people working in agriculture. Horticultural production is more intensive than broadacre production and has a higher degree of risk, such as a short season of supply and highly volatile prices as a result of highly inelastic supply and demand. Managing these issues requires a heightened understanding of risks, markets, transport and supply chain issues (including associated interactions with other horticultural production regions). Production is highly seasonal and can involve multiple crops produced on individual farms to manage labour resources. The importance of freshness in many horticultural products means seasonality of supply is important in the market. Farms in the Southern Gulf catchments have the advantage of being able to produce out-of-season supplies to southern markets. However, they must also compete with production regions in the NT and northern WA, which are already established production areas with associated infrastructure. Southern Gulf catchments may have an advantage over these regions in being geographically closer to most of the urban consumer centres of south-eastern Australia. Horticultural row crops Horticultural row crops are generally short-lived, annual crops, grown in the ground, such as seedless watermelons (Citrullus lanatus) alongside some varieties of rockmelon (Cucumis melo) and honeydew melons (Cucumis melo). Almost all produce is shipped to capital cities where major central markets are located. Row crops such as watermelon and rockmelon use staggered plantings over a season (e.g. planted every 2 to 3 weeks) to extend the period over which harvested produce is sold. This strategy allows better use of labour and better management for risks of price fluctuations. Often only a short period of time with very high prices is enough to make melon production a profitable enterprise. Horticultural row crops are well-established throughout the NT, Burdekin and Mareeba–Dimbulah Water Supply Scheme region in Queensland. The NT melon industry, consisting of watermelon (seedless), rockmelon and honeydew, produces approximately 25% of Australia’s melons. Melon production would be well-suited to the Southern Gulf catchments, which could compete with NT production. Horticulture typically requires specialised equipment and a large labour force. Therefore, a system for attracting, managing and retaining sufficient staff is also required. Harvesting is often by hand, but packing equipment is highly specialised. Irrigation is generally with micro equipment, but overhead spray is also feasible. Leaf fungal diseases need to be carefully managed when using spray irrigation. Micro spray equipment has the advantage of being able to deliver fertiliser along with irrigation. Horticultural tree crops Some fruit and tree crops, such as mangoes and citrus, are well-suited to the climate of the Southern Gulf catchments. Other species, such as avocado and lychee (Litchi chinensis), are not likely to be as well-adapted to the climate and soils. Tree crops are generally not well-suited to cracking clays, which make up some of the arable soils for irrigated agriculture in the Southern Gulf catchments. Horticultural tree production is more feasible on the lighter, well-drained soils in the north-west of the Southern Gulf catchments. A feature of fruit tree production is the time lag between planting and production, meaning decisions to plant need to be made with a long time frame for production and return in mind. The perennial nature of tree crops makes a reliable year-round supply of water essential. Some species, such as mango and cashew (Anacardium occidentale), can survive well under mild water stress until flowering. It is critical for optimum fruit and nut production that trees are not water stressed from flowering through to harvest, approximately from June to between November and February, depending on plant species and variety. This is a period in the Southern Gulf catchments when very little rain falls, and farmers would need to have a system in place to access reliable irrigation water during this time. High night-time minimum temperatures can reduce flowering in mangoes, although potential production regions in Southern Gulf catchments should not experience these temperatures extremes. Specialised equipment is required for fruit and nut tree production. The requirement for a timely and significant labour force necessitates a system for attracting, managing and retaining sufficient staff. In a remote location the cost of providing accommodation to such staff may be significant. Tree pruning and packing equipment is highly specialised for the fruit industry, as are the micro irrigation systems typically used in horticulture (see Section 3.3.4). 3.4.4 Plantation tree crops Of the potential plantation tree crops that could be grown in the Southern Gulf catchments, Indian sandalwood (Santalum album) and African mahogany (Khaya spp.) are likely to be the most economically feasible. Many other plantation species could be grown but returns are much lower than for sandalwood or African mahogany. African mahogany is well-established in plantations near Katherine and in north Queensland. Indian sandalwood is grown in the Ord River Irrigation Scheme (WA), around Katherine (NT) and in north Queensland. The first commercial crops of Indian sandalwood grown in Australia are now being harvested in the Ord River Irrigation Scheme and over the 24-year period of their cultivation to date many agronomic challenges have been solved. The economic viability of Indian sandalwood relies heavily on sandalwood oil price, and with the long lead time to production, decisions to plant Indian sandalwood is higher risk compared to many other cropping options. The recent liquidation of Quintis demonstrates the risks with forestry plantations and throws into doubt the viability of current and future Indian sandalwood production in the north. Although they are fertile, the cracking clay soils found in the Southern Gulf catchments are not well-suited to tree crops due to increased potential for root shearing without very careful and ongoing irrigation management, and their susceptibility to seasonal inundation. Plantation species require greater soil depth than most other crop species so deeper loams and sands can be well- suited where irrigation is available. Plantation tree crops require over 15 years to mature, but once established they can tolerate prolonged dry periods. Irrigation water is critical in the establishment and in the first 2 years of a plantation for a number of species. In the case of Indian sandalwood (which is a hemi root parasite), the provision of water is not just for the trees themselves but the leguminous host plant. Some plantation tree crops can be grown under entirely rainfed conditions (e.g. African mahogany). After harvest, trees are prepared for milling or processing, which does not need to occur locally. For example, given its high value, sandalwood is transported from northern Australia to Albany in southern WA, where the oil is extracted. 3.4.5 Niche crops Niche crops such as guar (Cyamopsis tetragonoloba), chia (Salvia hispanica), quinoa (Chenopodium quinoa), bush products, and others may be feasible in the Southern Gulf catchments, but there is limited verified agronomic or market data available for these crops. Niche crops are niche due to the limited demand for their products. As a result, small-scale production can lead to very attractive prices, but only a small increase in productive area can flood the market, leading to greatly reduced prices and making production unsustainable. There is growing interest in bush products, but there is insufficient publicly available information for inclusion with the analyses of irrigated crop options in this report. Bush product production systems could take many forms, from culturally appropriate wild harvesting targeting Indigenous cultural and environmental co-benefits to intensive mechanised farming and processing, resembling something like macadamia farming, with multiple possible combinations and variants in between. The choice of production system would have implications for the extent of Indigenous participation in each stage of the supply chain (farming, processing, marketing and/or consumption), the co-benefits that could be achieved, the scale of the markets that could be accessed (in turn affecting the scale of the industry for that bush product), the price premiums that produce may be able to attract, and the viability of those industries. The current publicly available information on bush products mainly focuses on eliciting Indigenous aspirations, biochemical analysis (for safety, nutrition and efficacy of potential health benefits of botanicals), and considerations of safeguarding Indigenous intellectual property (e.g. Woodward et al., 2019). Analysing bush products in a comparable way to other crop options in this report would first require these issues to be resolved, for communities to agree on the preferred type of production systems (and pathways for development), and for agronomic information on yields, production practices and costs to be publicly available. Past research on guar has been conducted in the NT, and trials are underway in north Queensland, which could prove future feasibility. There is increasing interest in non-leguminous, small-seeded crops such as chia and quinoa, which have high nutritive value. The market size for these niche crops is quite small compared with cereals and pulses, so the scale of production is likely to be small in the short to medium term. There is a small, established chia industry in the Ord River region of WA, but its production and marketing statistics are largely commercial-in-confidence. Nearly all Australian production of chia is contracted to The Chia Company of Australia or is exported to China. In Australia, The Chia Company produces whole chia seeds, chia bran, ground chia seed and chia oil for wholesale and retail sale, and it exports these products to 36 countries. 3.4.6 Aquaculture Aquaculture opportunities were not evaluated in this Assessment but were covered as part of a previous resource assessment for the Darwin catchments (Irvin et al., 2018). Appendix Adraws on that report to summarise: (i) the three most likely candidate species for new aquaculture industries in the Southern Gulf catchments; (ii) an overview of the different types of intensive and extensive production systems that could be employed; and (iii) the financial viability of different options for aquaculture development, presenting an updated financial analysis that follows the same approach used previously in Irvin et al. (2018). 3.5 Crop and forage management 3.5.1 Irrigation Irrigated agriculture in the Southern Gulf catchments will be limited by the amount of irrigation water that can be reliably supplied. The companion technical reports on river model scenario analysis (Gibbs et al., 2024), surface water storage (Yang et al., 2024) and groundwater characterisation (Raiber et al., 2024) provide an overview of reliable water yields. Irrigation is required to allow reliable establishment and production of most crops at the time of year they are optimally grown. The Southern Gulf catchments exhibit a strong wet-season/dry-season rainfall pattern (Figure 3-1). Short-duration crops sown during the wet season (November to April) may require little or no supplementary irrigation, while those sown during the drier winter months may require full irrigation during the growing period to meet crop transpiration demand. Perennial crops also require irrigation through the dry season. The primary determinants of the amount of irrigation water required are the time of year the crop is grown, the duration of the growing season, how much water can be stored in the soil (particularly what is available at the time of sowing), the amount of in-crop rainfall received, and PE (especially during periods when the canopy is fully developed). The amount of irrigation required per hectare is also determined by the crop grown and crop management, such as the irrigation system used. Section 3.3 covered the various types of irrigation systems that could be used in the Southern Gulf catchments, together with the implications of each for crop management, including irrigation efficiency and pumping costs. When irrigation water is limited, farmers need to consider a range of factors to determine the best way to make use of the limited water. Where multiple crops of different value are grown on the farm, the decision would be straightforward to give priority to irrigating a high-value horticultural plantation crop such as mangoes over planting a low-value broadacre crop. In other situations, a decision would need to be made about whether to grow a small area of fully irrigated crop, or a large area of partially irrigated crop. The choice of strategy in this situation can be heavily dependent on the amount of rain likely to fall during the cropping period, the degree to which water stress affects yields and the farmer’s attitude to risk. For example, one study showed that deficit irrigating wheat could be a viable strategy for managing water limitations in subtropical areas of south-eastern Australia (Peake et al., 2016), while yields of crops like cotton can be very sensitive to water deficits. Ultimately this would be an economic decision about trading off the high irrigated water-use efficiency that can be achieved with deficit irrigation against the impact on crop yield, harvest quality and revenue. Opportunities for rainfed cropping in the Southern Gulf catchments may be limited. Rainfed crops, grown without any applied irrigation water, rely on rainfall (either stored in the soil or received during crop growth) for all of their water requirements. The more rainfall that is received, the greater a rainfed crop will typically yield. Rainfed yields are usually lower than irrigated yields, but in years receiving above average rainfall during the growing season rainfed yields may be similar to irrigated yields with careful management. Short-duration crops such as mungbean and sorghum established during the wet season are able to utilise in-crop rainfall during early stages of crop development, and then rely on stored water in the soil to minimise water stress during the later grain-filling period (only soils with high water-holding capacity). Harvesting would occur at the end of the wet season. To achieve increased rainfed yields in seasons with above average in-crop rainfall, additional fertiliser inputs and pest management are also required. The inter-annual variability of rainfall means that continuous year-on-year rainfed cropping is unlikely to be feasible in the Southern Gulf catchments. Opportunistic cropping, pursued when conditions are favourable, particularly in the higher rainfall areas of the catchments in combination with soils that possess high water-holding capacity, is likely to provide the most profitable and sustainable approach to rainfed cropping. 3.5.2 Sowing time and cropping calendar Time of sowing can have a significant effect on achieving economical crop and forage yields, and on the availability and amount of water for irrigation required to meet crop demand. Cropping calendars identify optimum sowing times and compare the growing seasons of different crops. A cropping calendar is an essential crop management planning tool that is used to schedule farm operations for a given crop, from land preparation and sowing/planting times through the growing season to harvest (Figure 3-9) so that crops can be reliably and profitably grown. The calendar assumes best agronomic management in establishment, weed and insect control, and nutrient and water inputs to minimise stress during crop and grain development. Sowing windows vary in both timing and length among crops and regions, and they consider the likely suitability and constraints of weather conditions (e.g. heat and cold stress, radiation and conditions for flowering, pollination and fruit development) during each subsequent growth stage of the crop. Limited field experience currently exists in the Southern Gulf catchments for most of the crops and forages evaluated. The cropping calendar in Figure 3-9 is therefore based on knowledge of crops derived from past and current agricultural experience in the Ord River Irrigation Area (WA), Katherine and Douglas–Daly (NT), Mareeba–Dimbulah Water Supply Scheme and the Burdekin region (Queensland), combined with an understanding of plant physiology, which enables crop response to differences in local climates to be anticipated. The optimum planting window and growing season for each crop were further refined through local experience and use of the APSIM (Agricultural Production Systems sIMulator) cropping systems model. Some annual crops have both wet-season and dry-season cropping options. Perennial crops are grown throughout the year, so growing seasons and planting windows are less well defined. Generally, perennial tree crops are transplanted as small plants (not seeds), and in northern Australia this is usually timed towards the beginning of the wet season to take advantage of wet- season rainfall. Figure 3-9 Annual cropping calendar for cropping options in the Southern Gulf catchments WS = wet season; DS = dry season. Crop planting times \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\2_Crops\Cropping_Windows.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Sometimes crops can be successfully sown outside of the identified sowing windows without incurring a substantial yield penalty. In this analysis, sowing dates between September and November have generally been avoided because high evaporative demand and low water availability (see Section 3.1) are not conducive to seedling establishment; however, it is possible to sow at this time for many crops. Figure 3-9 considers only the optimal climatic conditions for crop growth and is intended to be used together with considerations of other location-specific operational constraints. Such constraints would include wet-season difficulties in access and trafficability and limitations on the number of hectares per trafficable day that available farm equipment can sow/plant. For example, clay-rich alluvial Vertosols are likely to present trafficability constraints throughout much of the wet season, especially in the poorer drained clays in the lower Southern Gulf catchments, while sandier Kandosols would present far fewer trafficability restrictions in scheduling farming operations (Figure 3-10). (a) (b) Figure 3-10 Soil wetness indices that indicate when seasonal trafficability constraints are likely to occur on sands, Kandosols (loamy sands) and Vertosols (high clay) with a Gregory climate for two thresholds (a) 80% and (b) 70% of the maximum plant available water capacity The indices show the proportion of years (for dates at bi-monthly intervals) when plant available water (PAW) in the top 30 cm of the soil is below two threshold proportions (70% and 80%) of the maximum PAW value. Lower values indicate there would be fewer days at that time of year when fields would be accessible and trafficable. Estimates are from 100-year APSIM simulations without a crop. In actual farming situations, once a crop canopy is established later in the season, crop water extraction from the soil would assist in alleviating these constraints. PAWC = plant available water capacity. Many suitable annual crops can be grown at any time of the year with irrigation in the Southern Gulf catchments. Optimising crop yield alone is not the only consideration. Ultimately, sowing date selection must balance the need for the best growing environment (optimising solar radiation and temperature) with water availability, pest avoidance, trafficability during the wet season and at harvest, crop rotation, supply chain requirements, infrastructure development costs, market access considerations and potential commodity price. For example, for annual horticultural crops growing season selection is based on meeting market windows outside of when southern production areas can supply product, or to coincide with optimal growing conditions for yield and Percent of years soil wetness is greater than trafficability threshold for soils \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\4_APSIMmodelling\SOGWRA-Charts_APSIM_v3.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 0% 20% 40% 60% 80% 100% 1-Jan1-Feb1-Mar1-Apr1-May1-Jun1-Jul1-Aug1-Sep1-Oct1-Nov1-Dec% of years with PAWC > than limitVertosol 80% thresholdKandosol 80% thresholdSand 80% threshold Percent of years soil wetness is less than trafficability threshold for soils \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\4_APSIMmodelling\SOGWRA-Charts_APSIM_v3.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au quality; while cotton is most reliable when flowering occurs in the sunny warm months of April to May and picking follows in the dry months of July to August. Many summer crops from temperate regions are suited to the tropical dry season (winter) because temperatures are closer to their optima and/or there is more consistent solar radiation (e.g. maize, chickpea and rice). For sequential cropping systems (that grow more than a single crop in a year in the same field), growing at least one crop partially outside its optimal growing season can be justified if it increases total farm profit per year and there are no adverse biophysical consequences (e.g. pest build-up). Growers also manage time of sowing to optimally use stored soil water and in-season rainfall and to avoid rain damage at maturity. Access to irrigation provides flexibility in sowing date and in the choice and timing of crop or forage systems in response to seasonal climate conditions. Depending on the rooting depth of a particular species and the length of growing season, crops established at the end of the wet season may access a full profile of soil water (e.g. 200+ mm PAWC for some clay soils, Vertosols). While timing sowing to maximise available water can reduce the overall irrigation requirement, it may expose crops to periods of lower solar radiation and extreme temperatures during plant development and flowering. It may also prevent the implementation of a sequential cropping system. 3.5.3 Nutrition Adequate crop nutrition is essential for achieving economic yields. Tropical soils are typically highly weathered and are usually low in the water-soluble nutrients nitrogen, phosphorus, potassium and sulfur and require their addition as fertiliser. Soil organic carbon is typically also low. Hence, nutrient management systems in the Southern Gulf catchments will require practices that can maximise organic carbon inputs via cover crops, stubble retention and mulch farming while minimising the loss of water-soluble nutrients, particularly during the wet season. Synchronising nutrient availability with crop demand is key to achieving adequate and cost- effective crop nutrition. Managers can mitigate nutritional risks by conducting thorough soil testing of paddocks. Because soil can be variable over relatively short distances, it may be necessary to sample soil for testing in a number of locations. 3.5.4 Weed and pest management Weeds can be a major contributor to economic loss in agricultural production systems and may also provide a mechanism for disease transmission. Management of weeds, particularly in irrigated systems, is important for reducing competition for resources (particularly water and nitrogen) and for maximising water and nitrogen use efficiencies in production. The cropping systems modelled in this report assume best practice in managing weed and pest infestation. 3.6 Cattle and beef production 3.6.1 Characteristics of the beef production system About 77% of the Southern Gulf catchments are used for grazing of natural vegetation by beef cattle and this is the dominant land use by area. The industry had an estimated annual gross value of $243 million in 2020–21 (Table 2-5). While the catchments in this Assessment do not match any stand-alone socio-economic, or biogeographical regionalisations used by the cattle industry, published information from the ‘Northern Downs’ in Queensland to the south-east of the Southern Gulf (Bowen et al., 2020), the ‘Northern Gulf’ in Queensland directly to the east of the Southern Gulf (Bowen et al., 2019; Rolfe et al., 2016) and the ‘Gulf’ region, encompassing that part of the Assessment area within the NT (Cowley, 2014) have been used below and in Section 4.4 to describe the cattle industry within the Southern Gulf catchments. The typical beef production system is a cow-calf operation with sale animals targeted to suit live export, slaughter and the United States grinding beef markets (Bowen et al., 2019, 2020). A number of properties send cattle to properties further south for backgrounding and fattening. Some of these properties are owned under the one enterprise, with Rolfe et al. (2016) finding an average of 2.2 properties per business within a survey of 18 properties in the Northern Gulf (Rolfe et al., 2016). Bowen et al. (2020) report that many businesses operate a breeding property in the Northern Gulf region in association with a growing property in the Northern Downs. However, their conclusion was that it was more profitable to turn-off live export steers in the Northern Gulf and feed-on steers from the more productive Northern Downs (450–480 kg liveweight). The within-year variation produced by the wet–dry climate is the main determinant for cattle production. Native pasture growth is dependent on rainfall, therefore, pasture growth is highest during the January to March period. During the dry season, the total standing biomass and the nutritive value of the vegetation declines. Changes in cattle liveweight closely follow this pattern, with higher growth rates over the wet season compared to the dry season. Indeed, in many cases cattle lose liveweight and body condition throughout the dry season until the next pulse of growth initiated by wet-season rains. A large area of land is needed to maintain one unit of cattle (typically termed an AE, or adult equivalent). This carrying capacity of land is determined primarily by the soil (and landscape) type, the mean annual rainfall and its seasonality, and the consequent native vegetation type. Carrying capacities in the Southern Gulf catchments typically range from about 3.5 to 14.2 AE/km2 (i.e. 7 to 28.6 ha/AE) in ‘B’ condition (from a four-point scale where ‘A’ is highest). While the cattle typically graze on native pastures, many properties supplementary feed hay to the weaner cohort, partly to train them to be comfortable around humans for management purposes and partly to add to their growth rates during the dry season when the nutritive value and total standing biomass of native pastures is falling. Urea-based supplements and supplements containing phosphorus are fed to a range of age and sex classes of the cattle. The urea-based supplements are to provide a source of nitrogen for cattle grazing dry-season vegetation while the phosphorus supplements, mostly provided over the wet season, are used because phosphorus is deficient in many areas yet it is required for many of the body’s functions such as building bones, metabolising food and producing milk (Jackson et al., 2015). Winter (1988), working in the Katherine region, found substantial benefits to phosphorus fertilisation and supplementation, particularly in early and late wet-season periods and when grazing pastures that had been oversown with legumes. 4 Approach for evaluating agricultural options 4.1 Multi-scale framework for evaluating agricultural viability The approach used to analyse the viability of agricultural development options draws on similar past technical assessments of new irrigated farming (Ash et al., 2014, 2018a, 2018b; Petheram et al., 2013a, 2013b; Stokes et al., 2017, 2023; Stokes and Jarvis, 2021; Webster et al., 2024) and a historical analysis of the successes and challenges of agricultural developments across northern Australia (Ash et al., 2014). The Assessment takes a multi-scale approach, from farm to regional scales (Figure 4-1): • The farm-scale performance component is a bottom-up analysis of farm performance, working from the biophysical and management determinants of crop yields and water use to indicative farm gross margins (GMs) that could be achieved for a range of cropping and fodder options (methods covered here in Chapter 4, with results presented in Chapter 5). • The scheme-scale viability component takes a generic top-down approach, working backwards from the costs of developing new enterprises and water resources (Chapter 7) to the water pricing and farm GMs that would have to be sustained in the long term to cover those costs (Chapter 8). • The regional-scale component looks at the knock-on economic effects that could occur if new agricultural areas were developed in the catchment of the Southern Gulf rivers (Chapter 9), and the market opportunities and constraints for the supply chains required for new farm produce (Section 2.2). Figure 4-1 Overview of multi-scale approach for evaluating the viability of agricultural development options Overview of approach for evaluating ag viability \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGSoGWRA-Diagrams.pptx For more information on this figure please contact CSIRO on enquiries@csiro.au StakeholdersOpportunitiesFarming options to be evaluatedFarm-scale: bottom-upCrop agronomy; Farm performanceScheme-scale: top-downPerformance required to cover costsRegional-scale: input–outputKnock-on regional economic impactSoilsWaterClimateCostsManagementVIABLE ? InfrastructureMarketsHistoricaldam benefits The combined analytical framework also allows fully integrated cost–benefit analysis of specific case studies, based on farm-scale analyses and information from assessments of land and water resources and associated water storage options. The added effort of rigorously adhering to such an integrating framework is more than offset by the advantages it provides: (i) biophysical and financial resources are all accounted for in a consistent and coherent manner; (ii) the design of all analyses remains focused on the ultimate goal of identifying the most suitable development options; and (iii) interpretation of results is focused on maximising the viability of those opportunities in the context of the environments of the Southern Gulf catchments and mitigating the risks and challenges involved. It also avoids becoming distracted by sub-disciplinary ‘optimisations’ of intermediate metrics, such as maximising crop yields, maximising water-use efficiency, or minimising unit costs of water and farm infrastructure, which can lead to suboptimal outcomes for configuring greenfield irrigation developments. The aim of the farm-scale analyses was to determine: (i) the level of farm ‘performance’ that can be achieved in the Southern Gulf catchments (specifically quantified here in terms of crop yields and water use (Section 4.2), and GMs (Section 4.3)); (ii) the relative ranking of crop options that show the most potential; (iii) the management practices that can maximise those opportunities, while dealing with local challenges; and (iv) the cropping systems that could combine that understanding into possible working configurations of farming options and crop sequences on profitable commercial farms. Ultimate financial viability would depend on additional capital and overhead costs and associated considerations for developing water resources and establishing new enterprises (which are covered in chapters 6 to 8). 4.2 Crop yields and water use 4.2.1 Analysis approach Nineteen irrigated crop options were selected to evaluate their potential performance in new irrigated farms in the Southern Gulf catchments (Table 4-1). The crops were selected to ensure that there was at least one option for each of the 13 ‘major crop groupings’ used in the companion technical report on digital soil mapping and land suitability (Thomas et al., 2024), provided that they had the potential to be viable in the Southern Gulf catchments (based on knowledge of how well these crops grow in other parts of Australia), were of commercial interest for possible development in the region, and there was sufficient information on their agronomy and farming costs/prices for quantitative analysis. The typology of crop groupings used in the land suitability assessments (Thomas et al., 2024) was based on crop responses to soil constraints, and does not correspond to the standard agronomic classification of crops according to the types of commodities they produce (as used in Table 4-1 and the rest of this report, following the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) typology). The analyses used a combination of Agricultural Production Systems sIMulator (APSIM) crop modelling and climate-informed extrapolation to estimate potential yield and water use for each of the 19 crop options (Table 4-1). Table 4-1 Crop options for which performance was evaluated in terms of water use, yields and gross margins The methods used for estimating crop yield and irrigation water requirements are coded as: A = APSIM; E = climate- informed extrapolation. Where two letters are used, the first is the primary method, and the second is used for sensibility testing (A, E) or applying adjustments (E, A; with adjustment multipliers shown in parentheses where the APSIM median was more than 10% outside the range of sensibility testing estimates). Mango (KP) is Kensington Pride, and Mango (PVR) is an indicative new high-yielding variety, likely to have plant variety rights (e.g. Calypso). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Agronomic climate analogues for the Southern Gulf catchments The nature of evaluating greenfield farming options in locations like the Southern Gulf catchments, where little irrigated commercial farming currently occurs, is that there is very limited agronomic data available of the type that is required for quantitative analyses. However, there are good analogues for climate and soils in the Southern Gulf catchments in agronomically similar environments at similar latitudes where irrigated cropping is well-established: the Katherine–Daly Basin (NT) is indicative of irrigated farming systems and potential crops grown on well-drained loamy soils, and the Ord River Irrigation Area (WA) and Burdekin River Irrigation Area (Queensland) are indicative of furrow irrigation on heavy clay soils. Figure 4-2 shows the close similarities in climate between possible cropping locations in the Southern Gulf catchments and Ord River (Kununurra, WA) and Burden River (Mareeba, Queensland): •Theclimate sitesof theSouthern Gulf catchmentshave lower temperatures inthe April toSeptember months, lower rainfall and higher solar radiation over the November toMarch wetseason compared toKununurra.The sitesin theSouthern Gulf catchmentshave lower rainfallbut higher daily maximum temperatures and solar radiationthan Mareeba. •AtGallipoli, theslightly lower minimumtemperatures from May to August can extend growingseason length. However,lower rainfall prior andafter thisperiodpermitsflexibility in plantingdate to avoid the lowertemperatures if required. •The climate from October to mid-December at all locations is characterised byextreme hightemperatures and high evaporative demand. Thehot conditionsduring this period arenotoptimal for active growth for the majority of crops and are onlysuitablefor crop maturation anddesiccation. Risks ofpre-harvest weathering and poor trafficabilityon clay soilsincreases significantly after mid-November. (a)Mean monthly rainfall(b) Mean daily maximum temperature Monthly rainfall comparisons \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Monthly max temperature comparisons \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au (c)Mean daily solar radiation(d) Mean daily minimum temperature Monthly daily solar radiation comparisons \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\1_Climate\SoWRA_climate analysis_v2.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Figure4-2Climate comparisons of Southern Gulfcatchmentsclimate sites versus established irrigation areas atKununurra(WA)and Mareeba (Queensland) Southern Gulfcatchmentslocations are Westmoreland, Gregory, Kamilaroiand Gallipoli. Chapter4 Approach for evaluating agricultural options|111 The approach here was therefore to initially estimate likely ranges of crop yields and water use based on cropping knowledge from these climate-analogous regions, data sourced from past research and farming experience at nearby locations, and consideration of biophysical differences between environments of the Southern Gulf catchments and those of source data (Figure 4-2). For example, crop yields of 7 to 10 t/ha (sorghum), 2.2 t/ha (mungbean) and 5 t/ha (peanut) have been achieved under irrigation in Queensland (GRDC, 2017; QDAF, 2017), and irrigated broadacre crops such as cotton, mungbean, niche grains, peanuts, sesame and forages have produced excellent yields when grown on these soils in Katherine–Daly and Ord Valley (Beach, 1995; O’Gara, 2010; Yeates and Martin, 2006; Yeates et al., 2022). Table 4-2 shows the extrapolated estimates made this way for ranges of likely yields, irrigation water requirements, and growing seasons for the broadacre crops that were simulated in APSIM. These estimates were used for sensibility testing and calibration of modelled outputs. For other crops where there was no APSIM model, yield and water use were estimated in a similar manner, using expert experience and climate-informed extrapolation from the most similar analogue locations in northern Australia where commercial production currently occurs (those estimates are provided with the results in Section 5.2). Given the lack of direct cropping data available from within the Southern Gulf catchments, a 20% margin of error should be allowed for all these estimates at the indicative catchment level (with further allowance for variation between farms and fields). Optimum planting windows within the growing season for each species are shown in Figure 3-9 (Section 3.5.2). Table 4-2 Crop yields and median irrigation water requirement delivered to the field WS = wet-season planted (December to early March); DS = dry-season planted (late March to August); Y = year (for perennial crop). Overhead spray irrigation usually requires 10% more irrigation water than subsurface tape. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Sources: Climate data extrapolated from Beach (1995), O’Gara (2010), Yeates and Martin (2006) and Yeates et al. (2022) Agricultural Production Systems sIMulator APSIM was used to estimate the crop water use and yield for those crops where modules were available (Table 4-1). All crops were sown between 1 March and 1 May (end of the wet season), except for the cotton which was sown 15 February for the wet-season cotton and 15 June for dry- season cotton. Yield estimates from APSIM should be considered the maximum potential under ideal management and growing conditions (e.g. before allowing for pest damage or imperfect management). Crop water use in APSIM outputs was estimated from fully irrigating the crop assuming 100% efficiency. Irrigation was triggered in simulations whenever PAW (plant available water) for the top 800 mm of the soil profile fell below a crop-specific threshold proportion (65% to 80%) of plant available water capacity (PAWC). Adjustments were then made to this 100%-efficiency estimate of crop water use to estimate the amount of irrigation water that would be applied on-farm (including application losses), based on the type of irrigation system used, as described in Section 3.3.1. APSIM is a modelling framework that simulates biophysical process in farming systems (Holzworth et al., 2014) and has been used for a broad range of applications, including on-farm decision making, seasonal climate forecasting, risk assessment for government policy making and evaluating changes to agronomic practices (Keating et al., 2003; Verburg et al., 2003). It has demonstrated utility in predicting performance of commercial crops, provided that soil properties are well characterised (Carberry et al., 2009). Some crop modules have been validated for environments similar to the Southern Gulf catchments and used in previous assessments of cropping potential (Ash et al., 2014; Carberry et al., 1991; Pearson and Langridge, 2008; Webster et al., 2013; Yeates, 2001). Many APSIM crop modules use a deterministic modelling approach to simulating crop processes of development, growth and partitioning, and hence require detailed measurements from field observations to parametrise and validate the model for each location. Such field observation data do not exist for the Southern Gulf catchments and were beyond the scope of this Assessment to acquire. In particular, some APSIM crop models underestimate crop water use in inland northern Australian environments (where crop water use is elevated by windy conditions with high vapour pressure deficits (VPDs) that APSIM has not been calibrated to). Detailed cotton trials with accurate measurements of water use, wind speeds and VPDs at Katherine were able to simulate these high levels of water use with a locally calibrated APSIM cotton model (Yeates and Martin, 2006). However, such well-calibrated models are not available for the Southern Gulf catchments, and the meteorological data required are not widely available (even outside the Southern Gulf catchments APSIM is not typically configured and calibrated to use wind speed data). To address this problem, if APSIM estimates of crop water use (after allowing for application losses) were outside the range estimated for sensibility testing by more than 10%, then an adjustment multiplier was applied to bring it into the estimated range (Table 4-2). Variation in environments of the Southern Gulf catchments For the main APSIM simulations of farm performance (crop yield and water use for each crop in Table 4-2), four locations were selected to represent some of the best potential farming conditions across the varied environments available in the Southern Gulf catchments. Each location consisted of a soil type and the climate associated with those areas of soils: • A Vertosol with a Gregory (–18.65°S, 139.25°E) climate. This soil represents the farming conditions of the lowland cracking clays (SGG 9, marked ‘A’ in Figure 3-8) and are the most extensive arable areas in the Southern Gulf catchments. During the wet season, access and limitations from floodplain inundation and workability may constrain cropping. Using grain sorghum as an indicator crop, the PAWC of the modelled soil was 212 mm (noting that PAWC differs between crops with different rooting patterns and physiologies). Daily historical meteorological data used for these simulations was from the Gregory weather station, which has a mean annual rainfall of about 540 mm. • A Chromosol with a Kamilaroi (–19.36°S, 140.04°E) climate. This soil represents some of the better farming conditions amongst the friable non-cracking clay soils (SGG 1 and Dermosols, SGG 2 marked ‘B’ in Figure 3-8) along the middle reaches of the Leichhardt River. The PAWC of this soil for grain sorghum was 93 mm, and the mean annual rainfall for Kamilaroi is about 577 mm. • A red Kandosol with a Westmoreland (–17.34°S, 138.25°E) climate. This soil represents some of the better farming conditions amongst the loamy soils (SGG 4, marked ‘C’ in Figure 3-8) found on elevated narrow alluvial plains along the Nicholson River and near Doomadgee. The PAWC of this soil for grain sorghum was 129 mm, and the mean annual rainfall for Westmoreland is about 780 mm. • A Vertosol with a Gallipoli (–19.14°S, 137.87°E) climate. This soil represents some of the better farming conditions amongst the cracking clay soils (SGG 9, marked D in Figure 3-8) having less wet-season issues than the Gregory (lowland) cracking clay soils, although surface and profile rock may limit some areas. The PAWC of this soil for grain sorghum was 146 mm, and the mean annual rainfall for Gallipoli is about 420 mm. Additional APSIM simulations were conducted to demonstrate agronomy principles, such as seasonal patterns of stored PAW and crop responses across a range of different levels of irrigation. To isolate the effects of a single factor at a time in these models (e.g. comparing Kandosol to Vertosol), all other factors were kept the same (e.g. the same climate for two different soils), which could result in additional combinations of soils and climate beyond the four listed above (used in the main simulations of crop performance). The locations of the four meteorological stations used for the simulations are also shown in Figure 3-8. The availability of meteorological data is very poor for the Southern Gulf catchments in terms of density of weather stations, gaps in historical records and the range of agronomically relevant measurements made (particularly the absence of vapour pressure and wind speed data). This limited the choice of the locations that could be modelled and the accuracy with which crop water demand can be modelled (i.e. before making calibration adjustments of the type used in Table 4-1). 4.2.2 Cropping systems New agricultural developments that focus on annual field crops may require sequential cropping (more than a single crop in a year) to generate sufficient revenue to cover the substantial costs of developing new enterprises. Annual broadacre crops have been grown sequentially for many decades in tropical Australia (e.g. in the Burdekin, Ord and Mareeba–Dimbulah Water Supply Scheme irrigation areas). The approach used was to explore what cropping systems could be practically implemented in the environments of the Southern Gulf catchments, as a way of synthesising and interpreting the results from the other farm-scale analyses. The aim was not to be prescriptive about cropping systems, but rather to provide insights on the issues and opportunities associated with developing integrated cropping systems relative to farming individual crops. 4.2.3 Rainfed cropping Although the focus of this Assessment was on irrigated crop and forage production, some limited analysis was also undertaken for opportunistic rainfed cropping. The APSIM simulations for the rainfed analyses were used to illustrate general agronomic principles across the contrasting environments in the Southern Gulf catchments (rather than for the full analyses of farm performance done for irrigated cropping options). 4.3 Greenfield crop gross margin tool The annual farm GM is the difference between the revenue received for harvested produce and the variable costs incurred in growing, harvesting and marketing the crop each year. It is a key, but partial, metric of farm financial performance. GMs here are calculated and expressed per hectare of cropped farmland, without explicitly specifying the total area farmed other than that it would be of sufficient scale to be cost efficient in the Southern Gulf catchments context (notionally about 500 ha for broadacre farms and 200 ha for horticulture). Undertaking a comparative analysis of farm GMs for multiple greenfield development options in a region lacking established commercial farms creates unique challenges that required a bespoke ‘greenfield farm GM tool’ to be developed (Figure 4-3). Figure 4-3 Farm gross margin tool used for consistent comparative analysis of different greenfield farming options The challenges faced, and the approach taken to address them, are summarised below: • Mix of GM templates of different historical provenance: Previous similar assessments have built on-farm GM tools from multiple different sources that used different approaches for farm financial accounting. A consistent accounting approach was required in this Assessment both so that cropping options could be compared on a like-for-like basis, and so that accounting was compatible with how these GMs were combined with capital and overhead costs in subsequent full ‘discounted cashflow’ (DCF) analyses (Chapter 8). For example, if a particular farming operation is treated and costed as being undertaken by an outsourced contractor, then capital costs of the associated equipment should not be included in subsequent capital costs of farm establishment used in full financial analyses. In addition, a consistent GM analysis framework provides for a smoother and more automated workflow, including the input of required data from the farm agronomy parts of the evaluation, and output of data from the subsequent scheme financial analyses. • Inappropriate translation from existing to greenfield farming location: When using a farm GM template for an established farming region (mainly southern and coastal areas) there are implicit assumptions about what farming operations are conducted and when they are scheduled, based on proven local practices. But when those templates are extrapolated to a new location without proven commercial farming, those implicit assumptions can break down and the GM accounting can become disconnected from the farming practices that would actually be required locally. In greenfield situations there is a need to tightly couple GM accounting with how farm operations would be scheduled and conducted in those locations (e.g. scheduling of farm operations and the equipment required needs to consider seasonal trafficability and other climate constraints, as does the choice of which fertilisers and pest/weed Farm gross margin approach \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGSoGWRA-Diagrams.pptx For more information on this figure please contact CSIRO on enquiries@csiro.au Base lookup data tablesCrop yieldWater useInputs $Operations $Labour $ (Variable) Farming systems (crop, operations, inputs, labour: scheduled to climate) Crop 1OperationsInputsCrop 2OperationsInputsCrop 3OperationsInputsCrop …nOperationsInputsFarming scenarios (farming system ×location ×management ×…) Farm Option 1Farm Option 2Farm Option 3Farm Option …x$ Outputs management methods are used and how they are applied). Building GMs ‘bottom-up’ from an explicit, locally adapted schedule of farm operations ensures this is the case. • Arbitrary inconsistencies in assumptions: When using GM templates from multiple different sources there are inevitably arbitrary differences in assumptions and costings (or, at least, it is laborious to keep these rigorously synchronised across templates). For example, such discrepancies would include the choice of fertilisers, which micronutrients are being applied (on the same soils), and which markets are being used for pricing transport costs of farm inputs and produce (including the point in the supply chain to which goods are delivered, freight is costed and payments to farmers are priced). These issues can be addressed with a standardised set of data tables, and rigorously logging the assumptions and the basis used for estimating each cost. An added advantage of this approach is that once a GM is developed for a farming system in one scenario, it is easier to rigorously adapt it to other applications (because it is obvious precisely how assumptions have changed and the exact cost basis on which new values need to be adjusted). The farm GM tool consisted of three main types of components, as illustrated in Figure 4-3. The foundation of analyses was a set of data tables with all the farm agronomic performance data generated in Section 4.2 (crop yields and water use) and a standard set of costs for inputs, farm operations and labour requirements to be applied consistently to all farming scenarios. Each farming system to be evaluated then had its own template that drew on the standard data tables. The farming system templates consisted primarily of a schedule of farm operations that linked to the machinery operating costs in the data tables, together with associated costs of inputs and labour requirements. Each farming operation allowed specifying up to three simultaneous compatible activities, for example, using a 166-kW tractor with airseeder and harrows to (i) plant 13 kg/ha cotton seed, (ii) with a Bollgard fee, and (iii) 100 kg/ha Granulock Z fertiliser, all in a single operation. Each operation also had a date associated with it, used to display a calendar of the farming operations, so that sensibility testing could ensure the farming system being costed was operationally viable and agronomically sound (relative to local climatic and trafficability constraints and optima, as discussed in Section 3.5.2). Farming templates also included other parameters specific to that farming system, such as the prices received for produce (which allowed splitting yield into different products/produce classes and specifying different prices for the same crop grown under different conditions in variant farming systems). The final component of the GM tool consisted of farming scenarios, which are parameter sets for each scenario specifying details of the farming system, crop performance data, and crop management required to calculate the final of set of GMs to be compared. The scenario parameters included specifying the type of irrigation, in order to automatically account for associated irrigation application losses and pumping costs. An adjustment could also be made to the total calculated cost of labour required for all farm operations to account for the portion that would be performed by permanent staff (accounted for separately in the overhead costs: noting labour costs have both variable (mainly seasonal workers) and fixed/overhead (mainly permanent staff) components). Because this Assessment focuses on the viability of greenfield irrigated development (i.e. including a new water source), the cost of water is not included in GMs as a variable cost, but is accounted for in the capital and operating costs of the new water source. The costs of the water sources are treated on a consistent like-for-like basis, so that alternate water sources can be substituted for each other in any arbitrary pairing with different farming options in the later scheme-level analyses of financial viability (see Chapter 8). All costs were specified in real terms with the base as December 2023 Australian dollars (as is the standard throughout this Assessment, adjusted for inflation from older sources where necessary). Costs of farming inputs were based on prices from suppliers in Townsville, and freight costs assumed that this is where they would be purchased. Since agricultural commodity prices (versus inputs) typically fluctuate more over time, they were notionally set at the average for the past decade (e.g. as documented in ABARES (2022) data series). Commodity prices do not represent a forecast, just a long-term historical precedent (to reduce the effects of temporary spikes and dips in current prices). Investors would need to make their own decisions about long-term future trends in input costs and commodity prices (see also Section 2.2.7 covering recent volatility in farmers’ terms of trade). Farm GMs were calculated, together with breakdown summaries of variable costs and revenue, for each farming option listed in Table 4-1. Given the uncertainties in estimating farm performance in greenfield situations, narrative risk analyses were also undertaken to illustrate how different challenges and opportunities could affect farm GMs. These narrative risk analysis accounted for cost and price variability across multiple factors. 4.4 Modelling the integration of forage and hay crops within existing beef cattle enterprises A commonly held view within the northern cattle industry is that the development of water resources would allow irrigated forages and hay to be integrated into existing beef cattle enterprises, thereby improving their production and, potentially, their profitability. Currently, cattle graze on native pastures, which rely solely on rainfall and any consequent overland flow. The quality of these pastures is typically low, and it declines throughout the dry season, so that cattle either gain little weight, or even lose weight, during this period. Theoretically, the use of on-farm irrigated forage and hay production would allow graziers greater options for marketing cattle, such as: (i) meeting market liveweight specifications for cattle at a younger age; (ii) meeting the specifications required for different markets than those typically targeted by cattle enterprises in the Southern Gulf catchments; and (iii) providing cattle that meet market specification at a different time of the year. Forages and hay may also allow graziers to implement management strategies, such as early weaning or weaner feeding, which should lead to flow-on benefits throughout the herd, including increased reproductive rates. Some of these strategies are already practised within the Southern Gulf catchments but in almost all incidences are reliant on hay or other supplements purchased on the open market. By growing hay on-farm, the scale of these management interventions might be increased, at reduced net cost. Furthermore, the addition of irrigated feeds may also allow graziers to increase the total number of cattle that can be sustainably carried on the property. There are very few cattle enterprises in northern Australia that are set up to integrate on-farm irrigation, notwithstanding the theoretical benefits. Despite its apparent simplicity, fundamentally altering an existing cattle enterprise in this way brings in considerable complexity, with a range of unknowns about how best to increase productivity and profitability. The most comprehensive guide to what might be possible to achieve by integrating forages into cattle enterprises can be found in Moore et al. (2021), who have used a combination of industry knowledge, new research and modelling to consider the costs, returns and benefits. Because there are so few on-ground examples, modelling has been used in a number of studies to consider the integration of forages and hay into cattle enterprises, summarised in Watson et al. (2021b). This study in the Southern Gulf catchments used CLEM (Crop Livestock Enterprise Model; Version 2023.11.7349; Crop Livestock Enterprise Model ) to model the impact of on-farm irrigated forages and hay for a representative property. CLEM is a whole-of-farm model. Native pasture (modelled with GRASP; Rickert et al., 2000) and several irrigated forage and hay options (modelled with APSIM; Holzworth et al., 2014) were prepared as input into CLEM on a monthly time step. Animal production, herd dynamics, financial parameters (overhead and variable costs and cattle and hay prices) and management actions within CLEM were then parameterised with information from a number of sources (Section 5.4.1). CLEM’s output then included information on cattle production and hence herd dynamics as well as financial metrics, which were used to compare across the base-enterprise, forage and hay options. Central to CLEM is a set of animal production equations that calculate reproductive rates, milk production, liveweight changes, mortality and other key functions. It is a relatively new model that builds on the Northern Australia Beef Systems Analyser (NABSA; Ash et al., 2015) but models the performance of all individual animals within the herd, rather than calculating outputs for each cohort of livestock (typically age and sex class). 5 Performance of agricultural development options This chapter presents the results and interpretation of the farm-scale analyses detailed in Chapter 4. It begins with a discussion of agronomic principles of rainfed and irrigated cropping in the catchment of the Southern Gulf rivers (Section 5.1). Those principles provide context for the results of the 19 individual crop options that were analysed in terms of crop yields, the amount of irrigation water used, and gross margins (GMs) (the three metrics referred to collectively as farm ‘performance’ in this and the following chapters) (Section 5.2). The irrigated crop options are grouped into broadacre, horticulture and plantation tree crops. The viability of these options is then discussed in a section on cropping systems, which considers the mix of farming practices that could most profitably be integrated within local environments of the Southern Gulf catchments, using both single and sequential cropping systems (Section 5.3). The final section evaluates the viability of integrating irrigated forages into existing beef production systems (the dominant current agricultural activity in the Southern Gulf catchments) (Section 5.4). This chapter aims to determine: (i) the level of farm performance that can be achieved in the Southern Gulf catchments; (ii) the relative ranking of crop options that show the most potential; (iii) the management practices that can maximise those opportunities, while dealing with the local constraints; and (iv) the cropping system configurations that might conceivably use that understanding to implement mixes of these crop options on profitable commercial farms. Ultimate financial viability would depend on additional capital and overhead costs and associated considerations for developing water resources and establishing new enterprises (covered in chapters 6 to 8 that follow). 5.1 Principles of rainfed and irrigated cropping 5.1.1 Rainfed broadacre cropping Rainfed cropping (crops grown without irrigation, relying only on rain) has been practised by farmers in northern Australia for almost 100 years, yet only small areas of rainfed crop production currently occur each year. This indicates that despite the theoretical possibility that rainfed crops could be produced using the significant rainfall that occurs during the wet season in the Southern Gulf catchments, in practice there are major agronomic and market-related challenges to rainfed crop production that have prevented its expansion to date. As rainfed farming depends on stored soil water and in-crop rainfall, the timing of crop establishment to maximise both production and economic yield is critical. Without the certainty provided by irrigation, rainfed cropping is opportunistic in nature, relying on favourable conditions in which to establish, grow and harvest a crop. The annual cropping calendar in Figure 3-9 shows that, for many crops, the sowing window includes the month of February. For relatively short- season crops such as forage sorghum and mungbean, this coincides with both the sowing time that provides close-to-maximum crop yield and the time at which the season’s water supply can be accessed with a high degree of confidence. Table 5-1 shows how plant available soil water content at sowing and subsequent rainfall in the 90 days after each sowing date varies over three different sowing dates for a Vertosol in the Southern Gulf catchments at Gregory. As sowing is delayed from February to April, the amount of stored soil water decrease. However, there is a significant decrease in rainfall in the subsequent 3 months after sowing. Combining the median plant available water (PAW) in the soil profile at sowing, and the median rainfall received in the 90 days following sowing, provides totals of 392, 250 and 183 mm for the February, March and April sowing dates, respectively. For ‘drier than average years’ (80% probability of exceedance), the soil water stored at sowing and the expected rainfall in the ensuing 90 days (<260 mm) would result in water stress and comparatively reduced crop yields. In ‘wetter than average years’ (20% probability of exceedance), the amount of soil water at the end of February combined with the rainfall in the following 90 days (527 mm) is sufficient to grow a good short-season crop (noting that the timing of rainfall is also important since some rain is ‘lost’ to runoff, evaporation and deep drainage between rainfall events). Opportunistic rainfed cropping would target those wetter years where PAW at the time of sowing indicated a higher chance of harvesting a profitable crop. Table 5-1 Soil water content at sowing and rainfall for the 90-day period following sowing for three sowing dates, based on a Gregory climate on Vertosol PAW = plant available water stored in soil profile. The 80%, 50% (median) and 20% probability of exceedance values are reported, for the 100 years between 1920 and 2020. The lower-bound values (80% exceedance) occur in most years, while the upper-bound values only occur in the most exceptional upper 20% of years. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au The success of rainfed cropping is clearly dependent on wet-season rainfall, but also the ability of the soil to store water for the crop to use as it finishes growing into the dry season. Figure 5-1 highlights the effects of diminishing water availability and increasing evapotranspiration likely to be encountered when sowing a rainfed crop at the start of April or later. This constraint is much more severe for sandier soils that have less capacity to store PAW (like Kandosols on the Doomadgee Plain in the Southern Gulf catchments, Figure 5-1a), compared to finer-textured soils (like the alluvial Vertosols in the Southern Gulf catchments, Figure 5-1b). (a) Gregory Kandosol (sandy, PAWC 129 mm) (b) Gregory Vertosol (high clay, PAWC 212 mm) Figure 5-1 Influence of planting date on rainfed grain sorghum yield at Gregory for (a) Kandosol and (b) Vertosol Estimates are from APSIM simulations with planting dates on the 1st and 15th of each month. Plant available water capacity (PAWC) values give the plant available water capacity that each soil profile can store. The shaded band around the median line indicates the 80% to 20% exceedance probability range in year-to-year variation. Heavier clay soils, such as Vertosols in alluvial areas including floodplains of the Southern Gulf catchments, hold more PAW, so rainfed crops grown on these soils would likely experience less water stress (Figure 5-1). However, alluvial soils are subject to frequent inundation and waterlogging during the wet season due to their location in the landscape and related poor drainage (Figure 3-10). This means that crops cannot always be sown at optimum times; fertiliser can be lost to runoff, drainage and denitrification; and in-crop management (e.g. for weed, disease and insect control) cannot be undertaken cost-effectively with ground-based equipment in a timely manner, a critical requirement for rainfed crop production to succeed (Robertson et al., 2016). Well-drained, but less fertile, Kandosols are extensive across northern Australia (Williams et al., 1985). Such soils also tend to be susceptible to erosion and hardsetting, which can decrease the infiltration of intense monsoon rainfall into the soil for storage and increase the difficulty of establishing crops. The low water-holding capacity of Kandosols, in combination with the extreme heat that often occurs in the Southern Gulf catchments between rain events, can quickly induce water stress at any stage during the crop life cycle. This contrasts with cropping systems in southern Australia where crops on similar soils are grown during winter when temperatures are cooler and rainfall is more regular and less intense, so crops experience less water stress. Seldom is soil uniform within a single paddock, let alone across entire districts. Without the homogenising input of irrigation to alleviate water limitations (and associated high inputs of fertilisers to alleviate nutrient limitations), yields from low-input rainfed cropping are typically much more variable (both across years and locations) than yields for irrigated agriculture. Furthermore, the capacity of the soil to supply stored water varies with soil type but it also depends on crop type and variety because each crop’s root system has a different ability to access water, particularly deep in the profile. This makes it harder to make generalisations about the viability of rainfed cropping in the Southern Gulf catchments as farm performance (e.g. yield and Influence of planting date on yield - kandosol \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\4_APSIMmodelling\SOGWRA-Charts_APSIM_v3.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Influence of planting date on sorghum yield - vertosol \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\4_APSIMmodelling\SOGWRA-Charts_APSIM_v3.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au GM) is much more sensitive to slight variations in local conditions. Rigorous estimates of rainfed crop performance on which investment decisions could be confidently made would require detailed localised soil mapping and crop trials. Socio-economic factors have also been identified as limitations to the development of rainfed farming in northern Australia (Chapman et al., 1996). Lack of significant local markets for broadacre commodities mean that transport costs to markets are much higher than costs incurred by alternative production regions across southern Australia, and that GMs for low-value, small- grained commodity crops (such as sorghum and maize) are too low to justify significant expansion of rainfed cropping for these crops. Producers also experience difficulties in attracting and retaining a trained labour force to hot, remote locations. These challenges have combined to prevent expansion of rainfed cropping. These socio-economic constraints affect irrigated agriculture too, in an interrelated way, since the two types of farming typically complement each other in achieving sufficient combined economies of scale to overcome many of these constraints. A core of irrigated farming often provides the impetus to attract an expansion of rainfed farming around it (and, conversely, the limited scale of irrigated broadacre farming has impeded development of rainfed cropping). Despite the challenges described above, recent efforts have identified potential opportunities for rainfed farming using higher-value crops, such as pulses or cotton in northern Australia. A preliminary Agricultural Production Systems sIMulator (APSIM) assessment of the potential for rainfed cotton in the Katherine region suggested that mean lint yields of 2.5 to 3.5 bales/ha may be possible at a range of locations in the vicinity of the Southern Gulf catchments (Yeates and Poulton, 2019). However, there was very high variability in median yields between farms (1– 5 bales/ha), depending on management and soil type. 5.1.2 Irrigated cropping responses and options Crops that are fully irrigated can yield substantially more than rainfed crops. Figure 5-2 shows how modelled yields for sorghum grown on Vertosols in the Southern Gulf catchments increase as more water becomes available to alleviate water limitations and meet increasing proportions of crop demand. With sufficient irrigation, yields are highest for crops grown over the dry season when radiation tends to be less limiting (plateau of Figure 5-2a versus Figure 5-2b). For wet-season sowing, unirrigated yields can approach fully irrigated yields in good years (yields exceeded in the top 20% of years, marked by the upper shaded range in Figure 5-2a). However, irrigation allows greater flexibility in sowing dates, allows sowing in the dry season too (for crops that would then grow through the wet season), and generates more reliable (and higher median) yields. (a) 1 February sowing (wet season) (b) 1 August sowing (dry season) Figure 5-2 Influence of available irrigation water on grain sorghum yields for planting dates (a) on 1 February and (b) 1 August, for a Vertosol with a Gregory climate Estimates are from 100-year APSIM simulations. The shaded band around the median line indicates the 80% to 20% exceedance probability range in year-to-year variation. Rainfed production is indicated by the zero point where no allocation is available for irrigating. The different amounts of irrigation water available (Figure 5-2) also indicate the range of options for growing crops from rainfed (zero ML/ha available irrigation water), to supplemental irrigation (where less water is available than required to maximise yield, but sufficient to achieve higher and more reliable yields than from purely rainfed cropping), to full irrigation (where there is sufficient water to achieve close to the maximum yield). Increasing amounts of ‘available’ water do not mean that those volumes were applied in Figure 5-2, only that it was available to apply to crops when needed; so, the yield curves plateau once crop demand is fully met. The simulations did not seek to ‘optimise’ supplemental irrigation strategies in years where available water was insufficient to attain maximum crop yields; irrigators would need to make those decisions in years where available water was lower than total crop demand. A key advantage of irrigated dry-season cropping in northern Australia is that the availability of water in the soil profile and surface water storages is largely known at the time of planting (in the early wet season: Table 5-1). This means irrigators have good advance knowledge for planning how much area to plant, which crops to grow, and what irrigation strategies to use, particularly in years where they have insufficient water to fully irrigate all fields. A mix of irrigation approaches could be used, such as expanding the scale of a core irrigated cropping area with other less intensively farmed areas, opportunistic rainfed cropping, opportunistic supplemental irrigation, opportunistic sequential cropping and/or adjusting the area of fully irrigated crops grown to match available water supplies that year. Influence of available water on yield for sorghum planted 1 Feb \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\4_APSIMmodelling\SOGWRA-Charts_APSIM_v3.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Influence of available water on yield for sorghum planted 1 Aug \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\4_APSIMmodelling\SOGWRA-Charts_APSIM_v3.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 6 5.2 Performance of irrigated crop options Measures of farm performance (in terms of yields, water use and GMs) are presented for the 19 cropping options that were evaluated (Table 4-1). As noted in Chapter 4, given the limited commercial irrigated farming that currently occurs in the Southern Gulf catchments to provide real-world data, estimates of crop water use and yields should be considered as indicative, and to have a possible 20% margin of error at the catchment scale (with further variation expected between farms and fields). GMs are a key partial metric of farm performance but should not be treated as fixed constants determined by the cropping system alone. They are a product of the farming and business management decisions made by individual farmers, input prices, commodity prices and market opportunities. As such, the GMs presented below should be treated as indicative of what might be attained for each cropping option once their sustainable agronomic potential has been achieved. Any divergence from assumptions about yields and costs would flow through to GM values, as would the consequences of any underperformance or overperformance in farm management. It is unrealistic to assume that the levels of performance in the results below would be achieved in the early years of newly established farms, and allowance should be made for an initial period of learning when yields and GMs are below their potential (see Chapter 8). Collectively however, the GMs and other performance metrics presented here provide an objective and consistent comparison across a suite of likely cropping options for the Southern Gulf catchments and an indicative maximum performance that could be achievable for greenfield irrigated development for each of the groupings of crops below. 5.2.1 Irrigated broadacre crops Table 5-2 shows the farm performance (yields, water use and GMs) for the broadacre cropping options that were evaluated. For crops that were simulated with APSIM, estimates are provided for locations with four different soil types associated with climates in the Southern Gulf catchments (Kandosol at Westmoreland, Vertosol at Gregory, Chromosol at Kamilaroi and Vertosol at Gallipoli) and include measures of variability (expressed in terms of years with yield exceedance probabilities of 80%, 50% (median) and 20%). For other crops, yield and water-use estimates (and resulting GMs) were estimated based on expert experience and climate-informed extrapolation from the most similar analogue locations in northern Australia where commercial production currently occurs. The broadacre cropping options with the best GMs (>$2000/ha) were cotton (both wet-season and dry-season cropping), forages (Rhodes grass) and peanuts (Chromosol). These suggest GMs up to $4500 might be achievable for broadacre cropping in the Southern Gulf catchments, although not necessarily at scale. Simulated yields (and consequent GMs) were generally lowest on the Kandosol and highest on the heavy Vertosol because of the increased buffering capacity that a high plant available water capacity (PAWC) clay soil provides against hot weather that triggers water stress even in irrigated crops. The Chromosol yields and GMs were slightly lower than the Vertosol due to its lower PAWC. With Vertosols in the Southern Gulf catchments there could be drainage challenges (Figure 3-10) that could limit the suitable area for farming, and may require more careful management than Vertosols that are currently used for cotton farming in other parts of Australia. Table 5-2 Performance metrics for broadacre cropping options in the Southern Gulf catchments: applied irrigation water, crop yield and gross margin (GM) for four environments Performance metrics are an indication of the upper bound that could be achieved after best-management practices for Southern Gulf catchments environments had been identified and implemented. All options are for dry-season (DS) irrigated crops sown between March and May (end of the wet season), except for the wet-season (WS) cotton, sown in mid-February and dry-season cotton sown in mid-June. Our modelled results suggest that dry-season planting of cotton in mid-June at Gallipoli led to a high incidence of crop failure and is not shown. Variance in yield estimates from APSIM simulations is indicated by providing 80%, 50% (median) and 20% probability of exceedance values (Y80%, Y50% and Y20%, respectively), together with associated applied irrigation water (including on-farm losses) and gross margins (GMs) in those years. The lower-range yields (Y80% exceedance) occur in most years, while the upper-range Y20% yields only occur in the most exceptional upper 20% of years. Note that applied irrigation water is not always higher in years with higher yields (Y20%). ‘na’ indicates 20% and 80% exceedance estimates that were not applicable because APSIM outputs were not available and expert estimates of just the median yield and water use were used instead. Peanut is omitted for the Vertosol location because of the practical constraints of harvesting root crops on clay soils. Freights costs assume processing near Cloncurry for cotton and Townsville for peanut, and that hay is sold locally. No crop model was available for sesame or hemp, so indicative estimates for the catchments were used. Cotton yields and prices are for lint bales (227 kg after ginning), not tonnes (t), and account for a lint turnout of 40% and a cotton seed price of $280/t. PAWC = plant available water capacity. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au A breakdown of the variable costs for growing broadacre crops shows that the largest costs are the costs of inputs (28%), farm operations (33%) and marketing (28%) (Table 5-3). The input and operations cost categories would have similar dollar values when growing the same crop in southern parts of Australia, but the cost category that puts northern growers at a disadvantage is the higher market costs. Total variable costs consume 84% of the gross revenue generated, which leaves sufficient margin for profitable farms to be able to temporarily absorb small declines in commodity prices or yields without creating severe cashflow problems. Table 5-3 Breakdown of variable costs relative to revenue for broadacre crop options The first nine crops (Cotton WS to Rhodes grass) are for the Chromosol, Kamilaroi climate (intermediate performance), and the last two crops are for general catchment estimates. ‘Input’ costs are mainly for fertilisers, herbicides and pesticides; the cost of farm ‘operations’ includes harvesting; ‘labour’ costs are the variable component (mainly seasonal workers) not covered in fixed costs (mainly permanent staff); ‘market’ costs include levies, commission and transport to the point of sale. WS = wet season; DS = dry season. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Risk analyses were conducted for the two broadacre crops with the highest GMs: cotton and forages. The risk analysis used a narrative approach, where variable values with the potential to be different from those used in in the GMs were varied and new GMs calculated. The narrative approach allows the impact of those variables to be determined. The cotton analysis explored the sensitivity of GMs to opportunities and challenges created by changes in cotton lint prices, crop yields and distance to the nearest gin (Table 5-4). Results show that high recent cotton prices (about $900/bale in 2022) have created a unique opportunity for those looking to establish new cotton farms in Southern Gulf catchments, since growers could transport cotton to distant gins or produce suboptimal yields and still generate GMs above $3000/ha. At lower cotton lint prices, a local gin becomes more important for farms to remain viable. At high yields and prices, the returns per megalitre of irrigation water may favour growing a single cotton crop per year, instead of committing limited water supplies to sequential cropping with a dry-season crop (that would likely provide lower returns per megalitre and be operationally difficult/risky to sequence). Table 5-4 Sensitivity of cotton crop gross margins ($/ha) to variation in yield, lint prices and distance to gin The base case is the Gregory Heavy Vertosol (Table 5-2) and is highlighted for comparison. The gin locations considered are a local gin near a new cotton farming region in the Southern Gulf catchments near Gregory, a hypothetical gin in Cloncurry, and the existing gin in Emerald, Queensland. Cotton lint prices are for the average over 2020-2024 ($700/bale), recent high prices from that period ($900/bale), and lower prices from 2017-2020 ($580/bale). Effects of a lower yield are also tested (the 6.8 bales/ha estimated as the dry-season yield for this location versus the base case of 10.7 bales/ha for wet-season cropping). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au The narrative risk analysis for irrigated forages also looked at the sensitivity of farm GMs to variations in hay price and distance to markets, but here focuses on the issues of local supply and demand (Table 5-5). Forages, such as Rhodes grass, are a forgiving first crop to grow on greenfield farms as new farmers gain experience of local cropping conditions and ameliorate virgin soils while producing a crop with a ready local market in cattle. While there are limited supplies of hay in the region, growers may be able to sell hay at a reasonable price, given the large amount of beef production in the Southern Gulf catchments and challenges of maintaining livestock condition through the dry season when the quality of native pastures is low. This would particularly be the case in dry years (as long as irrigation water is still available), when the quantity and quality of native pasture is low and demand for livestock dietary supplements increases. The scale of unmet local demand for hay limits opportunities for expansion of hay production without depressing local prices and/or having to sell hay further away, both of which lead to rapid declines in GMs (to below zero in many cases, Table 5-5). Another opportunity for hay is for feeding to cattle during live export, which could be integrated into an existing beef enterprise to supply their own live export livestock; this would require the hay to be pelleted. Section 5.4 considers how forages could be integrated into local beef production systems for direct consumption by livestock within the same enterprise. Table 5-5 Sensitivity of forage (Rhodes grass) crop gross margins (GMs) to variation in yield and hay price The base case is the Gregory Heavy Vertosol (Table 5-2) and is highlighted for comparison. Transporting the hay further distances would increase opportunities for finding counter-seasonal markets paying higher prices, but this would be rapidly offset by higher freight costs. FREIGHT COST/TONNE (DISTANCE TO DELIVER) FORAGE CROP GROSS MARGIN ($/ha) HAY PRICE/TONNE $150 $250 $350 $20 (local) 317 3530 9495 $92 (330 km to Cloncurry) –1708 1505 7471 $243 (1250 km to Emerald) –9917 –6704 –738 5.2.2 Horticultural crops Table 5-6 shows estimates of potential performance for a range of horticultural crop options in the Southern Gulf catchments. Upper potential GMs for annual and tree horticulture can be about $5000 per hectare per year. Capital costs of farm establishment and operating costs increase as the intensity of farming increases, so ultimate farm financial viability is not necessarily better for horticulture compared to broadacre crops with lower GMs (see Chapter 8). Note also that perennial horticultural crops typically require more water than annual crops because irrigation occurs for a longer period each year (mean of 9.0 versus 4.8 ML per hectare per year, respectively, in Table 5-6); this also, indirectly, affects capital costs of development since perennial crops require a larger investment in water infrastructure compared to annual crops to support the same cropped area. Table 5-6 Performance metrics for horticultural options in the Southern Gulf catchments: annual applied irrigation water, crop yield and gross margin (GM) Applied irrigation water includes losses of water during application. Horticulture is most likely to occur on well-drained Kandosols. KP = Kensington Pride mangoes; PVR = new high-yielding mango varieties with plant variety rights (e.g. Calypso). Product unit prices listed are for the dominant top grade of produce, but total yield was apportioned among lower graded/priced categories of produce as well in calculating total revenue. Transport costs assume sales of total produce are a split among southern capital-size markets in proportion to their size. Applied irrigation water accounts for application losses assuming efficient pressurised micro irrigation systems. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Crop yields and GMs can vary substantially amongst varieties, as is demonstrated here for mangoes. Mango production is well-established in multiple regions of northern Australia, including in the Darwin, Douglas–Daly and Katherine regions of the NT, and the Atherton Tableland and Burdekin River Irrigation Area Queensland. For example, the well-established Kensington Pride (KP) mangoes typically produce 5 to 10 t/ha while newer varieties can produce 15 to 20 t/ha. These new varieties (such as Calypso) are likely to be released with plant variety rights (PVR) accreditation. Selection of varieties also needs to consider consumer preferences and timing of harvest relative to seasonal gaps in market supply that can offer premium prices. Prices paid for fresh fruit and vegetables can be extremely volatile (Figure 5-3) because produce is perishable and expensive to store, and regional weather patterns can disrupt target timing of supply that can result in unintended overlaps or gaps in combined supply between regions. This creates regular fluctuations between oversupply and undersupply, against inelastic consumer demand, to the extent that prices can fall so low at times that it would cost more to pick, pack and transport produce than farms receive in payment. Amongst this volatility are some counter- seasonal windows in southern markets (where prices are typically higher) that northern Australian growers can target. Figure 5-3 Fluctuations in seedless watermelon prices at Melbourne wholesale markets from April 2020 to February 2023 Percent change information available however prices are commercially sensitive and not available Source: ABARES (2023) Horticultural enterprises typically run on very narrow margins, where about 90% of gross revenue would be required just to cover variable costs of growing and marketing a crop grown in the Southern Gulf catchments (Table 5-7). This makes crop GMs extremely sensitive to fluctuations in variable costs, yield and produce prices, amplifying the effect of already volatile prices for fresh fruit and vegetables. The majority of the variable costs of horticultural production occur from harvest onwards, mainly in freight. This affords the opportunity to mitigate losses if market conditions are unfavourable at the time of harvest, since most costs can be avoided (at the expense of forgone revenue) by not picking the crop. Influence of available water on yield for sorghum planted 1 Aug https://www.agriculture.gov.au/abares/data/weekly-commodity-price-update/australian-horticulture-prices#daff-page-main For more information on this figure please contact CSIRO on enquiries@csiro.au The narrative risk analysis for horticulture used the crop with the lowest GM (watermelons: Table 5-7) to illustrate how opportunities for reducing freight costs and targeting periods of higher produce prices could improve GMs to find niches for profitable farms (Table 5-8). Reducing freight costs by finding backloading opportunities or concentrating on just the smaller closest southern capital city market of Brisbane would substantially improve GMs, but a higher price than average is needed to generate positive GMs. The base case already assumed that growers in the Southern Gulf catchments would target the predictable seasonal component of watermelon price fluctuations (Figure 5-3), but any further opportunity to attain premiums in pricing could help convert an unprofitable baseline case into a profitable one. This example also highlights the issue that while there may be niche opportunities that allow an otherwise unprofitable enterprise to be viable, the scale of those niche opportunities also then limits the scale to which the industry in that location could expand, for example: (i) there is a limit to the volume of backloading capacity at cheaper rates; (ii) only supplying produce to the closest market excludes the largest markets (e.g. accessing the larger Sydney and Melbourne markets remains non-viable except when prices are high, Table 5-8); and (iii) chasing price premiums restricts the seasonal windows into which produce is sold or restricts markets to smaller niches that target specialised product specifications. Niche opportunities are seldom scalable, particularly in horticulture, which is a contributing factor to why horticulture in any region usually involves a range of different crops (often on the same farm). Table 5-7 Breakdown of variable costs relative to revenue for horticultural crop options ‘Input’ costs are mainly for fertilisers, herbicides and pesticides; the cost of farm ‘operations’ includes harvesting; ‘labour’ costs are the variable component (mainly seasonal workers) not covered in fixed costs (mainly permanent staff); ‘market’ costs include levies, commission and transport to the point of sale. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 5-8 Sensitivity of watermelon crop gross margins ($/ha) to variation in melon prices and freight costs The base case (Table 5-2) is highlighted for comparison. FREIGHT COST/TONNE WATERMELON GM (PERCENTAGE DIFFERENCE FROM BASE PRICE) (MARKET LOCATION) $337 (–25%) $450 (BASE PRICE) $675 (+50%) $900 (+100%) $342 (backloading to Brisbane) –10,836 –1,702 16,487 34,676 $429 (close market: Brisbane) –14,925 –5,791 12,398 30,587 $519 (all capital cities) –19,155 –10,021 8,168 26,357 $559 (Melbourne) –21,035 –11,901 6,288 24,477 The risk analysis also illustrates just how much farm financial metrics like GMs amplify fluctuations to input costs and commodity prices to which they are exposed. For horticulture, far more than broadacre agriculture, it is very misleading to look just at a single ‘median’ GM for the crop, because that is a poor reflection of what is going on within an enterprise. For example, a –50% to +100% variation in watermelon prices would result in theoretical annual GMs fluctuating between –$19.155/ha and $26,357/ha (Table 5-8). While, in practice, potentially negative GMs could be greatly mitigated (by not harvesting the crop), this still creates cashflow challenges in managing years of negative returns between years of windfall profits. This amplified volatility is another contributor to horticultural farms often growing a mix of produce (as a means of spreading risk). For row crop production, another common way of mitigating risk is using staggered planting through the season, so that subsequent harvesting and marketing are spread out over a longer target window to smooth out some of the price volatility. 5.2.3 Plantation tree crops (silviculture) Estimates of annual performance for African mahogany are provided in Table 5-9. The best available estimates were used in the analyses, but information on plantation tree production in northern Australia is often commercially sensitive and/or not independently verified. The measures of performance presented, therefore, have a low degree of confidence and should be treated as broadly indicative noting that actual commercial performance could be either lower or higher. Plantation forestry has long life cycles with low-intensity management during most of the growth cycle, so variable costs typically consume less of the gross revenue (28%) than broadacre or horticultural farming (Table 5-10). However, long life cycle production systems have additional risks over annual cropping in that there is a much longer period between planting and harvest for adverse events to affect the yield quantity and/or quality, prices of inputs and harvested products could change substantially over that period, and market access and arrangements with buyers could also change. The long lags from planting to harvest also mean that potential investors need to consider other similar competing pipeline developments (that may not be obvious because they are not yet selling product) and long-term future projections of supply and demand (for when their own plantation will start to be harvested and enter supply chains). The cashflow challenges are also significant, given the long-term outlay of capital and operating costs before any revenue is generated. Carbon and other externality credits might be able to assist with some early cashflow (e.g. if the ‘average’ state of the plantation, from planting to harvest, stores more carbon than the vegetation it replaced). Table 5-9 Performance metrics for plantation tree crop options in the Southern Gulf catchments: annual applied irrigation water, crop yield and gross margin (GM) Yields are values at final harvest, with 10% of final yield being marketable timber in 800 kg ‘round’ units. Other values are annual averages assuming a 20-year life cycle of the crop (representing the idealised ultimate steady state of an operating farm that was set up with staggered plantings for a steady stream of harvests). No discounting is applied to account for the substantial timing offset between when costs are incurred and revenue is received: any investment decision would need to take that into account. African mahogany performance is for unirrigated production. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 5-10 Breakdown of variable costs relative to revenue for plantation tree crop options ‘Input’ costs are mainly for fertilisers, herbicides and pesticides; the cost of farm ‘operations’ includes harvesting and labour; ‘market’ costs include levies, commission and transport to the point of sale. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 5.2.4 Climate change and crop production As noted previously (Section 3.1.8), mean annual rainfall in the Southern Gulf catchments suggest 44% of global climate models (GCM-PS) project a drier future (decrease in mean annual rainfall by more than 5%), 16% project a wetter future (increase in mean annual rainfall by more than 5%) and 40% project little change in rainfall. As an illustrative example of the possible impacts of climate change on future cropping in the Southern Gulf catchments, APSIM was used to simulate grain sorghum yield and water use for Gregory under current (historical) climate and two contrasting 2070 scenarios from GCM-PS projections: a hotter drier future (based on GFDL-CM3, 3.4 °C warmer and 52 mm/year drier than current), and a hotter wetter future (based on CCSM4, 2.7 °C warmer and 81 mm/year wetter than current). Simulations of both climate change scenarios used CO2 levels of 725 ppm, as projected for a future climate under RCP 8.5 (Riahi et al., 2011). APSIM simulation results for irrigated sorghum, sown in mid-January, indicated that the irrigation requirement was higher under both the future climate scenarios (Figure 5-4a), representing a median increase in annual demand for irrigation water of 90 mm (0.0 ML/ha) above the baseline scenario in a median year for dry future climate and 37 mm (0.37 ML/ha) for the wet future climate. Median sorghum grain yields of both wet and dry warming scenarios were only slightly lower than baseline yields, due to the detrimental effect of extreme temperatures on crop growth and development, which are worse in the drier climate scenario (about 0.2 t/ha lower) than the wetter scenario (about 0.1 t/ha lower) (Figure 5-4b). (a) Irrigation water requirement (b) Yield irrigated (c) Yield non-irrigated Figure 5-4 Probability of exceedance graphs for (a) simulated irrigation requirement (mm), (b) irrigated grain yield (t/ha) and (c) non-irrigated grain yield (t/ha) for a grain sorghum crop grown under current climate conditions and for both a drier and wetter future climate scenario on a Vertosol at Gregory in the Southern Gulf catchments For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Note that the APSIM model results provide an estimate of crop responses to alternative climate change scenarios while holding farming practices constant. Projections of real-world impacts are constrained by incomplete knowledge of crop and farming system response to alternative environmental conditions. The effect of extreme temperatures on sensitive crop growth processes (particularly flowering) in northern Australia is not well understood, and crop responses in reality may differ from those presented here. Additionally, adaptive management changes are available to farmers that may mitigate the negative effect of climate change on crop growth (e.g. using alternative sowing times to avoid heat stress during critical growth periods, and sowing longer duration varieties (including new climate-adapted varieties that may be developed) to counteract the reduced growth periods caused by higher temperatures). Nonetheless, it is prudent for any potential developer to consider the risks that future lower yields and higher water use could have on new farm developments, and the implications of this for recovering the costs of investments. For some crops, climate change impacts could involve more than just incremental changes in yields. This is particularly the case for crops that are already at the edge of their distributional ranges for phenological triggers (such as cold triggers for flower initiation in mangoes, e.g. NESP Earth Systems and Climate Change Hub (2019)). At the lower end of impacts, phenological changes may primarily change just the timing of harvest. Depending on how the new seasonal supply coincides with altered phenology and production windows from other regions, price premiums for out-of-season production could be affected. In worse cases, flowering, pollination and/or fruit set (or other phenological progression) may be curtailed in an increasing number of years, until crop production may no longer be viable without new climate-adapted varieties. 5.3 Cropping systems This section evaluates the types of cropping systems (crop species x growing season × resource availability × management options) that are most likely to be profitable in the Southern Gulf catchments based on the analyses of GMs above (Section 5.2), information from companion technical reports in this Assessment, and cropping knowledge from climate-analogous regions (relative to local biophysical conditions). Cropping system choices could include growing a single crop during a 12-month period, or growing greater than one, commonly referred to as sequential, double, or rotational cropping. This section covers the principles for implementing both types of cropping systems (beyond the issues for individual crops already dealt with in sections 3.4 and 5.2), with an emphasis on sequential cropping systems and the mix of cropping options that might be grown in sequence on a unit of land in the Southern Gulf catchments. 5.3.1 Cropping system considerations Selecting two or more crops to grow in sequence increases the complexity, beyond the issues already discussed in finding and adapting individual cropping options for the Southern Gulf catchments. The rewards from successfully growing crops in sequence (versus single cropping) can be substantial if additional net annual revenue can be generated from the same initial capital investment (to establish the farm). To find viable mixes of cropping options for the Southern Gulf catchments, developers will need to consider each of the four key factors below. Markets Whether growing a single crop or sequential cropping, the choice of crop(s) to grow is driven by the markets and supply chains that can provide a sufficient price and reliability of demand, while being able to supply those markets at sufficient scale and affordable cost. As the price received (and scale of markets) for different crops fluctuates, so too will the crops grown. In the Southern Gulf catchments, freight costs, determined by the distance to selected markets and processing facilities, will also need to be considered. A critical scale of production may be needed for a new market opportunity or supply chain to be viable (e.g. exporting grains from Townsville would require sufficient economies of scale for the required supporting port infrastructure and shipping routes to be viable). Crops such as cotton, peanut and sugarcane require a nearby processing facility. A consistent and critical scale of production is required for processing facilities to be viable (see Section 7.4). As mentioned in Section 0, feasibility assessments for cotton processing in northern Queensland have been carried out and recommend there is enough support for a viable cotton gin. Currently transport of raw cotton from the Southern Gulf catchments is to Emerald (Queensland) the nearest gin, whereas if it was possible to get to a more local gin and back in a day (without the added expense of an overnight stop) the viability of cotton production would be improved (Table 5-4). Most horticultural production from the Southern Gulf catchments would be sent to capital city markets, often using refrigerated transport. Horticultural production in the Southern Gulf catchments would have to accept a high freight cost compared to the costs faced by producers in southern parts of Australia. The competitive advantage of horticultural production in the Southern Gulf catchments is that higher market prices can be achieved from ‘out-of-season’ production compared to large horticultural production areas in southern Australia. Annual horticultural row crops such as melons would use staggered plantings, for example, planting at fortnightly intervals over a 3- to-4-month period, to reduce risk of exposure to low market prices and to make it more likely that very high market prices would be achieved for at least some of the produce. Market considerations are covered in more detail in Section 2.2. Operations Farmers need to be skilled at managing the operational complexity of adapting crop mixes and production systems to environments in the Southern Gulf catchments (including soils, water resources and climates), particularly in ‘learning’ through the challenging establishment years. Sequential cropping can require a trade-off against sowing at optimal times to allow crops to be grown within a back-to-back schedule. This trade-off could lead to slightly lower yields from planting at suboptimal times. For annual horticultural crops there would be additional trade-offs in the seasonal window over which produce can be sent to market (affecting opportunities to target seasonal peaks in prices and to use staggered planting dates to mitigate risks from price fluctuations). Growing crops sequentially depends on timely transitions between the crops and selecting crops that are agronomically and operationally compatible with each other, including growing seasons that reliably fit together in the available cropping windows. In the Southern Gulf catchments’ variable and often intense wet season, rainfall increases operational risk via reduced trafficability and the subsequent limited ability to conduct timely operations. A large investment in machinery (either multiple or larger machines) could increase the area that could be planted per day when fields are trafficable within a planting window. With sequential cropping, additional farm machinery and equipment may be required where there are crop-specific machinery requirements, or to help complete operations on time when there is tight scheduling between crops. Any additional capital expenditure on farm equipment would need to be balanced against the extra net farm revenue generated. Sequential cropping can also lead to a range of cumulative issues that need careful management, for example: (i) build-up of pests, diseases and weeds; (ii) pesticide resistance, which is often exacerbated by sequential cropping; (iii) increased watertable depth; and (iv) soil chemical and structural decline (e.g. Piaui, 2010; Chauhan et al., 2012; Lopes et al., 2012; Lopes and Guilherme, 2016). Many of these challenges can be anticipated before beginning sequential cropping. Integrated pest, weed and disease management would be essential when multiple crop species are grown in close proximity (adjacent fields or farms). Many of these pests and controls are common to several crop species where pests (e.g. aphids) move between fields. Such situations are exacerbated when the growing seasons of nearby crops partially overlap or when sequential crops are grown, because both scenarios create ‘green bridges’, which facilitate the continuation of pest life cycles. When herbicides are required, it is critical to avoid products that could damage a susceptible crop the following season or sequentially. Water Cropping systems are strongly influenced by the nature of water resources in terms of their costs to develop, the volume and reliability of supply, and the timing of when water is available relative to optimal planting windows (see companion technical reports on river modelling calibration (Gibbs et al., 2024), surface water storage (Yang et al., 2024) and groundwater characterisation (Raiber et al., 2024)). Sequential cropping leads to a higher annual crop water demand (versus single cropping) because: (i) the combined period of cropping is longer; (ii) it includes growing during the dry season in the Southern Gulf catchments; and (iii) PAW at planting will have been depleted by the previous crop. Typically, an additional 1 ML/ha on well-drained soils, and 1.5 ML/ha on clays, is required for sequential cropping relative to the combined water requirements of growing each of those crops individually (with the same sowing times). This additional water demand needs to be accounted for in initial farm planning, particularly where on-farm water storage or dry-season water extraction is required. Irrigating using surface water in the Southern Gulf catchments would face issues with the reliability and the timing of water supplies. Monitored river flows need to be sufficient to allow pumping into on-farm storages for irrigation (i.e. to meet environmental flow and river height requirements). The timing of water availability is analysed in the companion technical report on river model scenario analysis (Gibbs et al., 2024). The availability of water for extraction each wet season affects the options for sequencing a second crop. The cost of developing water sources (or the price at which water is supplied to irrigators) is also critical in determining what crops are grown, because only high-value cropping options will be able to afford to pay for more expensive water (see Chapter 8). For example, in other parts of Australia that use ‘deep’ bore water (>50 m total dynamic head (TDH)) for irrigation, farming is restricted to high-value horticulture because of the high capital and pumping costs involved in accessing and distributing that water. Soils Farming systems are governed by the nature of the soil resources in terms of their scale and distribution, their proximity to water sources and supply chains, their farming constraints, the crops they can support with viable yields, and their costs to develop (see companion technical reports on digital soil mapping and land suitability (Thomas et al., 2024), flood modelling (Karim et al., 2024) and Part III of this report). The largest arable areas in the Southern Gulf catchments are the cracking clay Vertosols (SGG 9, marked ‘A’ and ‘D’ in Figure 3-8) principally on the floodplains and alluvial plains of the Armraynald Plain and Barkly Tableland. Friable, non-cracking clay soils (SGG 1 and 2, marked ‘B’ and ‘C’) and loamy soils (SGG 4, marked ‘F’) make up substantial areas. There are good analogues of these environments in Southern Gulf catchments in successful irrigated farming areas in other parts of northern Australia. Katherine is indicative of farming systems and potential crops grown on well-drained loamy soils irrigated by pressurised systems, and the Burdekin River Irrigation Area and Ord River Irrigation Area are indicative of furrow irrigation on heavy clay soils. The good wet-season trafficability of the well-drained loamy Kandosols permits timely cropping operations and would enhance the implementation of sequential cropping systems. However, Kandosols also present some constraints for farming. Kandosols are inherently low in organic carbon, nitrogen, potassium, phosphorus, sulfur and zinc with other micronutrients often requiring supplementation (boron, copper and molybdenum). Very high fertiliser inputs are therefore required when first cultivated. Due to the high risk of leaching of soluble nutrients (e.g. nitrogen and sulfur) during the wet season, in-crop application (multiple times) of the majority of crop requirement for these nutrients is necessary (Yeates, 2001). In addition, high soil temperatures and surface crusting combined with rapid drying of the soil at seed depth reduce crop establishment and seedling vigour for many broadacre species sown during the wet season and early dry season, for example, maize, soybean and cotton (Abrecht and Bristow, 1996; Arndt et al., 1963). In contrast, the cracking clay Vertosols have poor trafficability following rainfall (Figure 3-10), inundation or irrigation, disrupting cropping operations. Farm design is a major factor on cracking clay soils and needs to minimise flooding of fields from nearby waterways, ensure prompt runoff from fields after irrigation or rain events, and ensure that farm roads maintain access to fields. Timely in-field bed preparation can reduce delays in planting. Clay soils also have some advantages, particularly in costs of farm development by allowing lower cost surface irrigation (versus pressurised systems) and on-farm storages (where expensive dam lining can be avoided if soils contain sufficient clay) (see companion technical report on surface water storage by Yang et al. (2024)). Clay soils also typically have greater inherent fertility than loamy soils (but initial sorption by clay means that phosphorus requirements can be high for virgin soils in the first 2 years of farming). 5.3.2 Potentially suitable cropping systems Potential crop species that could be grown as a single crop per year were identified and rated for the Southern Gulf catchments (Table 5-11) based on indicators of farm performance presented above (yields, water use and GMs: Section 5.2), together with considerations of growing season, experiences at climate-analogous locations, past research, and known market and resource limitations and opportunities. Many of these crops currently have small to medium-sized high- value markets, hence they are sensitive to Australian and international supply. Annual horticulture, cotton, peanut and forages are the most likely to generate returns that could exceed farm development and growing costs (Table 5-11). Table 5-11 Likely annual irrigated crop planting windows, suitability and viability in the Southern Gulf catchments Crops are rated as to how likely they are to be financially viable: *** = likely at low-enough development costs; ** = less likely for single cropping (at current produce prices); * S = marginal but possible in a sequential cropping system. Rating qualifiers are codes as L development limitation, M market constraint, P depends on sufficient scale and distance to local processor, and B depends on distance to and type of beef (livestock production) activity it is supporting. Farm viability is dependent on the cost at which land and water can be developed and supplied (Chapter 8). na = not applicable. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Due to good wet-season trafficability on loamy soils, there are many possible sequential cropping options for the Southern Gulf catchments Kandosols (Table 5-12). Given the predominance of broadleaf and legume species in many of the sequences (Table 5-12), a grass species is desirable as an early wet-season cover crop. Although annual horticulture and cotton could individually be profitable (Table 5-11), an annual sequence of the two would be very tight operationally. Cotton would be best grown from late January with the need to pick the crop by early August, then destroy cotton stubble, prepare land and remove volunteer cotton seedlings. That scheduling would make it challenging to fit in a late-season melon crop that would need to be sown by late August to early September. Similar challenges would occur with cotton followed by mungbean or grain sorghum. Fully irrigated sequential cropping on the Southern Gulf catchments Vertosols would likely be opportunistic and favour combinations of short-duration crops that can be grown when irrigation water reliability is greatest (March to October), for example, annual horticulture (melons), mungbean, chickpea and grass forages (2 to 4 months growing season length). Following an unirrigated (rainfed) wet-season grain crop with an irrigated dry-season crop could also be possible. However, seasonally dependent soil wetting and drying would limit timely planting and the area planted, which means that farm yields between years would be very variable. Sorghum, mungbean and sesame are the species most adapted to rainfed cropping due to favourable growing season length and their tolerance to water stress and higher soil and air temperatures. Soil drainage, accessibility and trafficability would limit the scale of farming in the wet season within the Southern Gulf catchments (which would restrict opportunities for establishing local processors). Table 5-12 Sequential cropping options for Kandosols WET-SEASON PLANTING, DECEMBER TO EARLY MARCH DRY-SEASON PLANTING, MARCH TO AUGUST CROP GROWING SEASON CROP GROWING SEASON Mungbean Early February to late April Annual horticulture Mid-May to late October Sorghum (grain) January to April Peanut (not on clay) January to April or February to May Cotton Late January to early August Mungbean Mid-August to late October Sorghum (grain) Mid-August to mid-November Forage/silage Mid-August to early November; cut then retained as wet-season cover crop Mungbean Early February to late April Cotton Early May to early November Mungbean Peanut Sesame Soybean Early February to late April Early January to late April Early January to late April Early January to late April Maize May to October Sesame or Sorghum (grain) January to late April Chickpea May to August Mungbean Sesame Soybean Early February to late April January to late April January to late April Grass forage/silage May to early November; cut then retained as wet-season cover crop 5.4 Integrating forages into livestock systems 5.4.1 Base-enterprise A base case beef cattle enterprise was developed for the Southern Gulf catchments. The nominal soil type was a cracking grey and/or brown clay such as found on the ‘Bluegrass Browntop Plains’ in ‘B’ condition as described by Southern Gulf Natural Resource Management (Southern Gulf NRM, 2016). The rainfall location used was Augustus Downs Springs, because of the quality of record. Output from the model was used for the period 1963–64 to 2020–21 (i.e. 56 years). The parameter estimates used to set up the model were derived from a number of published sources (Ash et al., 2018a, 2018b; Bowen et al., 2019, 2020; Chudleigh et al., 2019; Cowley, 2014; Jackson et al., 2015; McLean and Holmes, 2015; Meat and Livestock Australia, 2006; Moore et al., 2021; Rolfe, 2016; Tyler et al., 2012) as well as local knowledge and online sources (e.g. httpAustralian Fodder Industry Association ; Feed Central ; Feed Test ; Nutrien Ag Solutions ; Meat and Livestock Australia ). The base-enterprise can be thought of as somewhere between the more productive Northern Downs to the south-east (Bowen et al., 2020) and the less productive Northern Gulf, to the east (Bowen et al., 2019) and the ‘Gulf’ within the NT to the west (Cowley, 2014). The base-enterprise was set up in the Crop Livestock Enterprise Model (CLEM) as a self-replacing cow-calf operation, focused on selling into the live export market, with castrate males sold at a minimum 280 kg liveweight (but noting that actual sale weights of individuals were typically in excess of this because there were only two sale dates per year). Any remaining castrate males were sold at the first selling month after the animals reached 25 months age. The base-enterprise was set up with two rounds of mustering. The main selling month (muster) was May with the second muster and consequent sales in September. The mating system was ‘controlled’ (i.e. bulls were introduced to the cows in January and removed at the end of May). Young females, aged between 16 and 20 months, were sold in May. The selling criterion was set as the bottom 30% by weight as a proportion of normalised weight. The model then dynamically balanced breeder numbers by selling excess breeders at the first or second muster, while keeping the maximum number of breeders at or below a set amount, depending on feed availability. For the base-enterprise, maximum breeder numbers were set at 1580. The maximum breeder numbers were set in order to maintain an annual utilisation rate of 18% (cattle offtake of native pasture equal to 18% of native pasture growth, averaged across years), which is conservative. The same utilisation rate was set for all six management options (including irrigated forages) detailed below. In order to achieve a 18% utilisation rate the maximum number of breeders was altered for each management option. In the base-enterprise, calves were weaned at 170 kg liveweight minimum or 7 months old in May and a second weaning in September at 100 kg minimum or 5 months old. Calves were naturally weaned once they had reached an age of 8 months. Animals marked for sale were sold in May and September. Remaining breeders were sold when they reached a maximum age of 120 months. All animals were fed a supplement containing nitrogen and phosphorus between May and November and a phosphorus supplement between December and April. In its current configuration, CLEM assumes that phosphorus is not limiting so that the addition of a phosphorus supplement in the model is for the purposes of accurate costing rather than altering production outputs. Broadly speaking, these enterprise characteristics can be thought of as a small cattle enterprise within the Southern Gulf catchments run by an owner-manager. The exception to this is the use of controlled breeding. While not unknown in the Southern Gulf catchments, it is not commonly practised for the whole herd, although Cowley (2014) reports that 11% of producers in the Gulf District carried out some form of controlled mating. However, the concentration of calving in the CLEM model due to the controlled mating made it much easier to track cohorts of animals for comparisons across the forage and hay options. Bowen et al. (2020) also included controlled mating in their scenario analysis in the Northern Downs. The simulated enterprise is small for the Southern Gulf catchments and was due to the need to manage large data outputs across all six management options. Many of the properties in the Southern Gulf catchments run more than 20,000 adult equivalents (AEs). The results from this CLEM analysis can be scaled to these much larger numbers by multiplying by a factor (say 10) so that for example, a 2000 AE herd multiplied by a factor of 10 represents a 20,000 AE herd, although of course economies of scale will reduce some of the costs in the larger enterprises and may improve financial outcomes. Variable and overhead costs were drawn from a number of sources (see above) and then indexed from either the date of publication, or the period of collection, through to December 2023, recognising that there has been high volatility, and general increases, in costs, since that time. Similarly, livestock prices in recent years have been highly volatile with Meat and Livestock Australia’s National Feeder Steer Indicator for ‘Queensland Yearling Steer 280 to 330 kg liveweight’ reaching a maximum in January 2022 of 661 cents/kg, but with a mean over the 10- year period between February 2014 and February 2024 of 349 cents/kg. It was 361 cents/kg in February 2024 (Meat and Livestock Australia ). Clearly, such volatile livestock prices will have a big impact on enterprise profitability, with or without irrigated forages. In CLEM, liveweight prices can be set for different age and sex classes. The Southern Gulf base-enterprise model was set up to test the sensitivity of beef prices based on the following: • LOW beef price. Beef prices were set to 275 cents/kg for males between 12 months and 24 months old, declining across age and sex classes to 134 cents/kg for cows older than 108 months. For the modelled base-enterprise option, this gave a price of 229 cents/kg averaged across the herd and across years. • MED beef price. Beef prices were set to 350 cents/kg for males between 12 months and 24 months old, declining across age and sex classes to 170 cents/kg for cows older than 108 months. For the modelled base-enterprise option, this gave a price of 291 cents/kg averaged across the herd and across years. • HIGH beef price. Beef prices were set to 425 cents/kg for males between 12 months and 24 months old, declining across age and sex classes to 206 cents/kg for cows older than 108 months. For the modelled base-enterprise option, this gave a price of 354 cents/kg averaged across the herd and across years. A GM per AE was calculated as the total revenue from cattle sales minus total variable costs (Table 5-13). A profit metric, earnings before interest, taxes, depreciation and amortisation (EBITDA) was also calculated as total revenue minus variable and overhead costs, which allows performance to be compared independently of financing and ownership structure (McLean and Holmes, 2015) and is used in the analysis of net present value (NPV). 5.4.2 Irrigated forage and hay options As outlined in Section 4.4, the use of forages and hay grown on-farm to supplement cattle is uncommon in northern Australia. There is still much to be learned about the most appropriate forage and hay species to grow, how best to manage the forages and hay to ensure high-quality feed, which cohort(s) of cattle to feed, how the feeding should be managed and which market specifications should be targeted to obtain maximum return. The number of possible combinations of options is large, making it difficult to compare options. The modelling outlined in this section took a conservative approach, using three species of forage and hay crops, feeding young cattle only and keeping a constant market specification based on a minimum sale weight of 280 kg for castrate males, noting that the mean sale weight was greater than this because sales occurred only twice per year, in May and September (for the two base- enterprise, and the lablab stand and graze options, see below) or May and October (for the forage sorghum stand and graze option, and the two hay options). The primary market was considered to be live export, either directly or through sales/transfers to other properties with live export as the ultimate destination. Ideally, production would increase by allowing cattle to reach minimum selling weight at a younger age and allowing for greater weight gain during the dry season when animals on native pasture alone either lose weight, or gain very little weight. There are also potential benefits to the reproductive capacity of the herd by providing better nutrition to young females. Finally, the addition of forages and hay allows more cattle to be carried, while still maintaining a utilisation rate of native pastures close to 18%. The approach considered three different forage and/or crop options, which were modelled in APSIM and used as an input to the CLEM modelling: • Rhodes grass, which is a perennial grass, capable of high biomass values but requiring careful management to optimise biomass and nutritive content. At high biomass levels, the nitrogen content is diluted. It also requires frequent cutting in order to maintain sufficiently high dry matter digestibility. Rhodes grass is probably the most common crop grown on irrigation on cattle enterprises in northern Australia, and while there are some data available regarding its management and production in broadly comparable environments (e.g. Giovi Agriculture, 2018), readily published data for comparison are scarce. • Forage sorghum, an annual grass crop, grown over a period of 7 months. Careful management of forage sorghum is required if cattle are put on to the crop to graze it directly (i.e. stand and graze) due to the risk of prussic acid poisoning (O’Gara, 2010). • Lablab, an annual legume crop which typically provides a higher quality of feed compared to the two grasses but over a shorter period, and at lower biomass yields. These options were compared against a base-enterprise and a base-enterprise plus hay that included buying hay for supplementary feeding to weaners for the 2 months following weaning, which is a common practice in the northern grazing industry (Tyler et al., 2012), including in the Southern Gulf catchments. The costs for producing the irrigated forages and hay were based on those that sat behind the Northern Australia Beef Systems Analyser (NABSA) modelling found in Ash et al. (2018a, 2018b) and indexed to consumer price index (CPI). These costs were treated as variable costs and were on a per hectare basis. The area of forages and hay grown was determined by matching the monthly availability from the irrigated forages and hay with the nutritional demands of the cattle being fed, accepting small shortfalls rarely. Such an approach overestimates the amount of land required for irrigation because in practice a manager can move livestock from the irrigated area to native pasture within time steps of a day and can be more flexible in approach than the model allows. A total of six options were tested (all included nitrogen and phosphorus supplementation) with summarised results shown in Table 5-13: 1. Base-enterprise. No supplementary hay or forage feeding. The weaning criteria in May was 7 months old or 170 kg and that in September was 5 months old or 100 kg. Natural weaning occurred at 8 months old. 2. Base-enterprise plus hay. That is, base-enterprise but with the addition of reasonable quality hay bought off-farm to supplement the weaners in the first 2 months after weaning, while they remained on native pasture. Weaning weight was reduced to a minimum of 140 kg or 5 months old at the May weaning and 100 kg or 5 months old at the September weaning. Natural weaning occurred at 8 months old. The same weaning criteria were applied to the four irrigated options below. 3. Irrigated forage sorghum fed as stand and graze from June to October for all animals that were weaned and less than 24 months. In the model, the animals did not have access to native pasture (although in practice the animals would be moved between the irrigated forage sorghum and native pasture as required). In the model, the aim was to reduce irrigated forage shortfalls in any month to a minimum and balance that with the number of hectares irrigated, noting that any additional hectares incurred a cost. The irrigated area was set to 205 ha. 4. Irrigated forage sorghum grown for hay, which was fed from June to October for all animals that were weaned and less than 24 months old at the time of access to the hay. The animals remained in a paddock with access to native pasture and the amount of hay provided was set to 80% of their potential intake. About 20% of the hay was considered to be wasted by trampling, etc. Excess hay was sold into the market. The irrigated area was set to 140 ha. 5. Irrigated lablab fed as stand and graze from June to September for all animals that were weaned and less than 24 months old at the time of access to the irrigated forage. In the model, the animals did not have access to native pasture (although in practice the animals would be moved between the irrigated lablab and native pasture as required). In the model, the aim was to reduce irrigated forage shortfalls in any month to a minimum and balance that with the number of hectares irrigated, noting that any additional hectares incurred a cost. The irrigated area was set to 150 ha. 6. Irrigated Rhodes grass grown for hay, which was fed from June to October for all animals that were weaned and less than 24 months old at the time of access to the hay. The animals remained in a paddock with access to native pasture and the amount of hay provided was set to 80% of their potential intake. About 20% of the hay was considered to be wasted by trampling, etc. Excess hay was sold into the market. The irrigated area was set to 65 ha. 5.4.3 Herd and financial impacts GMs at MED beef prices for the irrigated feeding options ranged between $15/AE and $194/AE (Table 5-13), with GMs for the two base-enterprises being $163 and $152. This is broadly consistent with some of the GMs found in similar studies (Ash et al., 2018a, 2018b; Moore et al., 2021) given the beef prices used here and noting the wide range of assumptions used across these studies. McLean et al. (2023) provide GMs for a range of breakdowns that are also broadly consistent with the base-enterprises reported here, noting that the specific period of analysis has a heavy influence on the GM, due to the volatility of beef prices, with the inclusion of 2020–21 and 2021–22 providing particularly high GMs. For the 12-year average of the period 2010–2011 to 2021–22 McLean et al. (2023) provide the following GMs: (i) whole industry average for the northern industry $199.79, top 25% for the northern industry, $225.13; (ii) northern industry herds of 1600 to 5400 head, whole industry, $211.25 and top 25%, $249.22; and finally (iii) the Cape York and Gulf region (ABARES Region 311) average performance, $129.26 and top 25% $174.16. Rolfe et al. (2016) found GMs in the northern Gulf region ranging between $20 and $207 with a mean of $116 from a detailed study of 18 businesses for the period 2008–09 to 2012–13. Considering GMs only, the decision to irrigate becomes less attractive at LOW beef prices and more attractive at HIGH beef prices. The main aim in the model was to keep forage or hay shortfalls to a minimum while trying to minimise the area of irrigation needed. At all three beef prices, total revenue was highest for the four irrigated forage or hay options compared to the two base-enterprise options but the higher costs for the irrigated options led to lower GMs. At MED beef prices, EBITDA was highest for the Rhodes grass hay option at $160,929/year and lowest for forage sorghum stand and graze at –$232,238/year. The Rhodes grass hay option and the forage sorghum hay option produced the most liveweight sold per year, and the highest incomes. An NPV analysis allows consideration of the capital costs involved in development, which is not captured in the gross margin or EBITDA. The analysis used two costings ($15,000/ha and $25,000/ha) for the capital costs of development used in the NPV analysis (Table 5-14). Table 5-13 Production and financial outcomes from the different irrigated forage and beef production options for a representative property in the Southern Gulf catchments Details for LOW, MED and HIGH beef prices are found in the text in Section 5.4.1. Descriptions of the six management options are found in Section 5.4.2. AE = adult equivalent; EBITDA = earnings before interest, taxes, depreciation and amortisation. Cattle are sold twice per year in all options. Cattle are sold in May for all options. Cattle are sold in September for the two base-enterprises and for lablab stand and graze. Cattle are sold in October for forage sorghum stand and graze and the two hay options. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 5-14 Net present values for forage development options Details for LOW, MED and HIGH beef prices are found in Section 5.4.1. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au NPVs were calculated using the same assumptions as elsewhere in this Assessment (i.e. over a 40- year evaluation period at a 10% discount rate and assumed a 50:50 breakdown of assets with a 40- year life span and a 15-year life span). Given the numerous uncertainties involved in estimating the NPV, the analysis was kept deliberately simple. Specifically, EBITDA was used to proxy free cashflows with no adjustments made for working capital and other items that are typically employed to estimate expected free cashflows. In addition, terminal value is assumed to be negligible. The NPV analyses showed that only two irrigated options had a positive NPV, that of Rhodes grass hay at MED and HIGH beef prices and the lower of the two development costs per hectare. All other options gave a negative NPV and even the two positive NPVs were low ($18,444 and $114,386), suggesting that a decision to irrigate would need to assume beef prices remaining strong in order to be viable. Note that cost of capital theory is complex and investors need to understand their weighted average cost of capital (WACC) and the relative risk of the project compared to the enterprise’s existing project portfolio (Section 8.2.1). A significant proportion of the animal production increases due to the irrigated forage options came from the increased number of breeders that could be carried, and the decreased number of young animals being carried over an additional wet season in order to achieve sale weight, while still keeping the utilisation rate of native pastures close to 18%. The two irrigated hay options allowed the highest number of breeders to be carried (1800) compared with 1580 and 1600 for the two base-enterprises. This flowed through to the total number of AE carried being about 17% to 19% higher than the two base-enterprises averaged across all years. The total liveweight sold each year was about 38% to 44% higher, using the same comparison of options due to the higher liveweight gains from the feeding options combined with the higher AE. The irrigated options also increased the herd’s weaning rate by 0.4% to 3.4% compared to the base-enterprise without weaner feeding. Even an increase of several percent is known to have lifetime benefits throughout the herd. For the two base-enterprises and the two stand and graze options, 100% of the income was from sales of cattle (noting all livestock were sold on a per kilogram basis, including ‘cast for age’ herd bulls). For the two irrigated hay options, excess hay was sold into the market. This contributed to about 36% to 38% of total income. While the options were not set up for hay sales to be a significant part of the enterprise structure, the irrigated areas required to ensure there were no hay shortfalls meant that excess hay was produced in most years and sold into the market. The most obvious biophysical impact of the various feeding strategies was the increase in liveweight, compared to the base-enterprise (Figure 5-5). This allowed a greater proportion of the animals to be sold earlier. For example, for the two hay options, more than 77% of the ‘one year old castrate males’ (i.e. 8 to 12 months old) were sold in October at a minimum weight of 280 kg, while no animals from the same cohort under the two base-enterprise options met the minimum weight at that time (Table 5-13). These latter animals were retained for an additional wet season, with 48.3% (base-enterprise) or 60.3% (base-enterprise plus hay) being sold in the following May as one and half year olds’ (i.e. 15 to 19 months old). Keeping the utilisation rate at 18.0% meant that carrying these animals for the extra period lowered the number of breeders that could be carried and the overall stocking rate (i.e. AE). In summary, three patterns of growth to reach sale weight (280 kg) occurred. For the two base-enterprises, no animals reached sale weight in September as ‘one year olds’. By the following May 48.3% (base-enterprise) or 60.5% (base-enterprise plus hay) had reached sale weight. About 11% were sold in the next September as ‘two year olds’. The remaining 40.5% (base-enterprise) or 28.6% (base-enterprise plus hay) were then sold in the following May as ‘two and a half year olds’. By contrast, the majority of animals in the forage sorghum hay, lablab stand and graze, and Rhodes grass hay options were sold as ‘one year olds’ in October. The majority of the rest (17.8%, 25.2% and 17.8% respectively) were sold in the following May. The remainder were sold in the next October. None of this cohort remained for sale in the following May as ‘two and a half year olds’. Theforage sorghum graze option sat between these two extremes.Veryfew were sold as ‘oneyear olds’ in October, mostwere sold as ‘one and a half year olds’inthefollowingMaywithalmost all ofthe remainder sold in thefollowing September. Only 1.3% remained to be sold as‘two and a half year olds’ in the followingMay. Counter-intuitively,the average weight of the animals born at the end of November (November- born) wasslightly higher for thebase-enterprisecompared to thebase-enterprise plus hayoption(Figure5-5). Thiswas due to thedifferent weaning criteria applied. For the base-enterprise thecriteria usedforthe May weaningwas 7monthsoldor 170kg, comparedtothe criteria of5monthsoldor 140kg in thebase-enterpriseplus hay. Therefore, a large majority (90.4%) of thebase-enterprisecohort wasnot weanedinMay and remainedin the paddockwith theirmothers. Whilethisallowed themto maintain growth rates slightlybetter than those weaned at lighterweights and supplemented with hay, by remaining with their mothers they can lowerthereproductive rate of theherd.Thisdid not show in themodel,possibly becausethe utilisation rateusedwas conservative, therefore the cows wereableto maintain liveweights conducive toconception and successfullycarrying through a pregnancy.By contrastnearly all (99.1%) of thebase-enterprise plus haycohort wereweaned inMay, at lighterweights,and were supplementedwith hay.Notethat feeding hayto weaners hasother management benefits beyond weight gain. Liveweight (kg) 55050045040035030025020015010050 0 NovDecJanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSepOct Month Baseline Baseline plus weaner hay Forage sorghum graze Forage sorghum hay Lablab graze Rhodes grass hay Minimum sale weight (280kg) Figure5-5Mean liveweights for each option for male animals born at the end of November For the purposes of this graph, all sales were switched off, in order to show growth ratesover the full period of feeding,without the removal of sale animals having an impact on the mean weights of the remainder of the cohort. 152|Financial and socio-economic viability ofirrigated agricultural development The forage sorghum stand and graze option provided a 36 kg benefit compared to the base- enterprise plus hay (29 kg benefit against the base-enterprise) by the end of the first year feeding period (June to October) but this was lower than the benefit in the lablab stand and graze option, due to the lower protein content in the full sorghum sward. The lablab option provided the highest growth rates over the feeding period, but the extra month of feeding allowed the two hay options to provide the highest liveweights going into, and through, the wet season. The monthly growth rates are at the upper end of the scale under these conditions but reflect optimum conditions in the model. While there are advantages to some form of irrigated forage or hay production, the introduction of irrigation to an existing cattle enterprise is not for the faint-hearted. The options here range from an area that would require 1.6 pivots of 40 ha each to an area that would require more than five 40-ha pivots. A water allocation of about 1.1 to 2.1 GL would be required to provide sufficient irrigation water. The capital cost of development would range between $975,000 for 65 ha of Rhodes grass hay at a development cost of $15,000/ha to $5,125,000 for 205 ha of forage sorghum stand and graze at a development cost of $25,000/ha. In addition, the grazing enterprise would need to develop the expertise and knowledge required to run a successful irrigation enterprise of that scale, which is quite a different enterprise to one of grazing only. This is a constraint recognised by graziers elsewhere in northern Australia (McKellar et al., 2015) and almost certainly contributes to the lack of uptake of irrigation in the Southern Gulf catchments. An interesting corollary comes from the work of Bowen et al. (2020) in the Northern Downs region. They identified the critical importance of low-cost strategies to ‘get body condition and herd structure right’ rather than expending considerable resources on energy and protein supplements, despite improving steer growth rates or breeder reproduction performance. Part IIIEconomics Part IIIanalyses the scheme-scale viabilityof irrigated development options and economicconsiderationsbeyondthe farmgate required to succeed. Chapter6reviews recent large dam projects in Australia for how well proposed benefitswererealised inpractice toelicit lessons for future developments and toprovide context for thesubsequent economicanalysis chaptersthat follow. Chapter7providesindicators of theagricultural demand trajectories for newwater inQueenslandand describesthe typesand costsoftheenablinginfrastructure required to support large-scaleirrigated development. Chapter8uses a genericfinancial analysis approach to demonstrate the key determinants ofirrigation scheme viability that investorsneed to balanceand providestoolsthat allow users toestimate theviabilityofdifferent developmentconfigurations. Chapter9quantifies theregional benefitsof irrigated development using regionalinput–output analysis andpresentsan environmental input–output(I–O) analysisshowinghow increasedagricultural water use would stimulate additional demand fromother water users. Part IVconcludes by summarising keyprinciples for identifyingagricultural investmentopportunities in theSouthern Gulfcatchments. Irrigated cropping andon-farm waterstorage Source: CSIRO 6 Lessons learned from recent Australian dam- building experiences 6.1 Introduction Large public infrastructure projects are complex investments, where it is difficult to decide in advance whether sufficient benefits will be derived to justify the costs involved. This is exacerbated by the fact that many costs are not readily apparent until after construction has begun, and it can take many years after construction is complete before it becomes clear whether the planned growth trajectory and ultimate scale of benefits is achieved. Cost–benefit analysis (CBA) has been widely used to assist decision makers in evaluating the likely net benefits from proposed projects and prioritising investments, including for transport developments (roads, railways, bridges, etc.) and water resource developments (including dams, pipelines, etc.). The economics part of this Assessment, therefore, begins by looking at the lessons that can be learned from past use of CBAs in large infrastructure projects. Lessons from these experiences provide context for the indicative infrastructure costs (Chapter 7), scheme financial analyses (Chapter 8) and regional benefits (Chapter 9) in the following chapters, and an opportunity to better plan and evaluate future water infrastructure projects. Despite CBA having been very widely used for a long period of time, there are far fewer examples where the estimated costs and benefits (used to justify the project) have been revisited at a later date, after the development has been constructed and in operation for a number of years. Ex-post evaluation of CBAs is important to highlight: (i) whether estimates for both the scale and timing of flows of costs and benefits are achieved in practice, and (ii) opportunities for learning to improve evaluations of future projects. Such insights could improve forecasting and decision making in the future. In a review of Australian dam CBA costings estimates, Petheram and McMahon (2019) observed a strong likelihood of cost overruns compared to CBA estimates. Such biases have implications for the quality of decisions for prioritising investments in projects. The benefits of ex-post evaluation are increasingly being recognised in Australia. For example, ex- post evaluations have been completed on a sample of national road investment projects since 2005, with findings and lessons learned published to inform future ex-ante and ex-post project evaluations (BITRE, 2018). Infrastructure Australia1 has provided guidance on developing and appraising high-quality infrastructure project proposals and have encouraged wider application of post-completion reviews, that is, using ex-post comparisons between actual outcomes and the forecasts identified within the business case.2 Such ex-post evaluations allow outcomes of 1 Infrastructure Australia is an independent statutory body established to advise governments, industry and the community on the investments, processes and reforms required to deliver better infrastructure for all Australians (for more information see Infrastructure Australia website ). 2 The most recently updated guidance, published 2021, includes information on defining problems and opportunities, identifying and analysing options, developing the business case, and preparing an economic appraisal including a CBA (for more information see Infrastructure Australia website ). completed projects to improve planning and management and mitigate risks in future projects (Infrastructure Australia, 2021a). While there are some examples of ex-post evaluations of the costing data from public infrastructure CBAs, such cases are much more common for road and transport related developments than for water infrastructure CBAs. Of the limited examples where water resource development CBAs have been evaluated, the focus has been on exploring the accuracy of the forecast capital costs (rather than on the benefits/demand component of the CBA). Such research has shown a history of cost overruns in dam construction projects, in Australia and internationally, where a capital cost overrun is defined as the percentage difference between the actual cost of constructing the dam and the publicly stated or contracted cost immediately prior to construction. Examples include an international study that found mean cost overruns of 96% for mega-dam construction projects (Ansar et al., 2014), and an Australian-focused study that found mean cost overruns of 120% (Petheram and McMahon, 2019). Systematic biases in costings of large infrastructure projects occur both from under estimating unit costs of individual components and by omitting essential enabling infrastructure components altogether (Ansar et al., 2014; Office of the Auditor General Western Australia, 2016; Flyvbjerg et al., 2002; Odeck and Skjeseth, 1995; Wachs, 1990). For example, a review of the Ord-East Kimberley Development Plan (for expansion of the Ord irrigation system by about 15,000 ha) found that there were additional costs of $114 million to the Western Australian Government, beyond the planned $220 million state investment in infrastructure to directly support the expansion (Office of the Auditor General Western Australia, 2016). Literature on ex-post evaluations of the forecast benefits from public infrastructure developments is scarce, particularly for water infrastructure. Only one such study was available, an international evaluation that found a sample of large dams from 52 different countries had underperformed with regards to the anticipated benefits and service delivery (World Commission on Dams, 2000a). This study noted that ‘Large dams designed to deliver irrigation services have typically fallen short of physical targets, did not recover their costs and have been less profitable in economic terms than expected’ (World Commission on Dams, 2000b, p. xxxi). This study’s findings included that the forecasting of future demand for water from dam developments around the world was frequently inaccurate, and, with regards to irrigation dams in particular, that the estimates of demand tended to be overstated. Given that (i) there is limited research exploring the accuracy of benefits/demand forecasting for CBA compared to evaluations of the costing component, and (ii) there are indications that demand forecasts are often poorly related to real water needs, this report focuses on the less researched element of CBAs: the demand for increased water supplies and their associated benefits. Within Australia, ex-post evaluations of the accuracy of water demand and benefit forecasting in CBA supporting water resource developments have not historically been prepared. However, the importance of such evaluations is increasingly being recognised. For example, the 2021 update to the Infrastructure Australia Assessment Framework recommends post-completion reviews (PCRs) for all major infrastructure projects and requires PCRs for all projects where Infrastructure Australia assessed the original business case (Infrastructure Australia, 2021a, p. 8). Further, the recently published National Water Grid Investment Framework (DCCEEW, 2022) specifies that agreement to conduct a post-completion project evaluation, in consultation with the National Water Grid, will be an Australian Government condition for investment in future water infrastructure projects. The review in this chapter used a sample of large and recently constructed Australian dams based on publicly available information and reports. This review provides baseline information regarding the ex-ante and ex-post information available for recent water resource developments, and highlights lessons for possible ways of improving future water infrastructure planning and assessments. The review also provides context for interpreting CBAs from independent analyses (such as those presented in Chapter 8 and those that adhere to the Infrastructure Australia technical guidelines for economic appraisal (Infrastructure Australia, 2021b)) relative to those from project proponents (where there may be selection biases and incentives to present scenarios where benefits exceed costs). Methods for this review are set out in Section 6.2, the summary of the case studies is described in Section 6.3, and key findings are set out in Section 6.4. 6.2 Methods and case study selection The Australian National Committee on Large Dams (ANCOLD) websiteFigure 6-1, and summary information on each dam is provided in Table 6-1. 3 lists 570 dams, ranging in capacity from 11 ML to 12,400 GL and constructed between 1857 and 2012 to provide water for domestic, industrial and agricultural use, in addition to hydro-electricity generation and flood mitigation. Based on criteria of having completed construction in 2000 or later, and having a capacity in excess of 40 GL, five developments were selected for review. The geographic locations of the five dams are show in 3 ANCOLD website Locations of five dams used in costing review map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-503_Map_Australia_and_river_basins_new dams_V1.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 6-1 Locations of the five dams used in this review The dams are numbered in blue as 1: New Harvey Dam, 2: Paradise Dam, 3: Meander Dam, 4: Wyaralong Dam and 5: Enlarged Cotter Dam. Table 6-1 Summary characteristics of the five dams used in this review Dam completion date and capacity sourced from the Australian National Committee on Large Dams (ANCOLD) website (ANCOLD website ). Documents reviewed for each dam are listed in Table 6-2. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au †Constructed as part of wider Stirling-Harvey redevelopment scheme, the New Harvey Dam was to supply water to irrigated agriculture to free up water from the Stirling Dam to increase urban water supply. ‡This dam is listed on ANCOLD as having capacity of 24 GL. The dam was constructed with a capacity of 43 GL but designed to make 24 GL of water available for irrigation. For each case study, publicly available documentation was obtained from government and other sources relating to: (i) initial plans and approval processes for the dams including environmental impact statements (EISs), economic justifications (including CBAs), sustainable water strategies, etc.; and (ii) post-construction publications containing relevant information regarding the use of, and benefit flow from, the dams. Based on the information sourced, the forecast water demand in the project proposal was compared to the actual demand that emerged post construction, providing an ex-post evaluation of the accuracy of demand and benefit forecasts. Overall, the limited availability of data in the public domain (regarding specific quantity, timing and purpose) prevented a precise quantitative analysis of demand forecast (in)accuracies; instead, the information was qualitatively assessed to determine the likelihood of demand having been under or over-estimated in the original dam proposals. This review does not seek to provide a systematic review of all relevant literature but focuses on those recent dams for which the best information is publicly available and most relevant to current water infrastructure planning in Australia. While the small sample size is a limitation, it is sufficient to highlight some of the most important CBA principles learned from recent past experience. A further key limitation relates to the limited availability of detailed reporting on dam developments, both ex-ante and ex-post, in the public domain. This is partially due to the commercialisation of the water authorities in Australia, and consequentially, the commercial-in- confidence nature of much of the data, which is compounded by difficulties in sourcing historical documents that may have been issued in limited hard copy rather than made widely available. This Assessment has focused purely on existing public documents and has not sought to collect independent primary data on actual water usage and benefits over time. 6.3 Proposed and realised outcomes for each case study development The context and summary of outcomes for each of the five dams selected are set out below. Further details on the expectations and outcomes arising from each development are presented in Table 6-2. Table 6-2 Summary of the expectations and reported outcomes for each dam reviewed For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au CBA = cost–benefit analysis Sources for information: 1 Water and Rivers Commission (2000) 2 Water and Rivers Commission (1998) 3 NECG (2001) 4 National Competition Council (2003) 5 MJA (2003) 6 QWI (2007) 7 Queensland Government (2009) 8 Icon Water website 9 ACTEW (2009b) 10 ACTEW (2009a) 11 Water Corporation website 12 Resource Economics Unit (2007) 13 Harvey Water website 14 Sunwater (2019) 15 Mainstream Economics and Policy (2014) 16 Hyperlink to: Fairymead sugar mill to shut doors 17 Hyperlink to: Bundaberg Sugar announces closure of 135-year-old Bingera sugar mill following low cane supply 18 Adept Economics (2020) 19 Davey and Maynard (2010) 20 Tasmanian Irrigation website , information on irrigators and entitlements sold based on accessing webpage 12 July 2022 21 SEQWater (2017) 22 SEQWater website 23 Based on population level at 2020 ABS website , and predictions for 2032 ABS website 24 Icon Water (2018) 25 Icon Water website 26 ACT Government (2014, p. 20) New Harvey Dam The construction of the New Harvey Dam formed part of the wider Stirling-Harvey redevelopment scheme. It was designed to enable irrigated agriculture within the region to continue with business as usual while supplying significant additional water to the integrated water supply scheme for Perth and other towns in the region, and to meet the anticipated demand for high-priority water resulting from expected population growth in Perth and surrounding regions. Since completion of the development, the objectives appear to have been broadly met, with water use for irrigated agriculture being maintained while priority water uses have been met from a number of sources including the New Harvey Dam and from the construction of two desalination plants in the region. Overall, agricultural demand for irrigation water does appear to have met target. Paradise Dam This water infrastructure development was designed to facilitate regional development and to encourage wealth and job creation within the Burnett region, one of the least affluent and least developed locations across Queensland. The project comprised constructing Paradise Dam while also constructing some new weirs in the region and augmenting others. The development was predicted to stimulate substantial increases in agricultural production, to meet anticipated demand generated from both population growth across South-east Queensland and export markets, and to contribute some high-priority water to the region. However, the development experienced difficulties following major flood events in 2011 and 2013 when structural problems with the construction of the dam wall emerged, requiring capacity to be restricted. Significant rectification works have been approved with early works expected to commence in 2023.4 Demand for water has emerged more slowly than anticipated in the CBA, revealing considerable shortfalls between actual and predicted water demand; further, anticipated knock-on developments (such as the construction of a chicory processing plant and a new cane and pulp mill) have also failed to materialise. A recent analysis (Adept Economics, 2020) has critiqued the assumptions in the original CBA as being overoptimistic regarding the trajectory of water demand, and to have failed to take account of possible climate variability. Overall, demand for water does not appear to have met target. 4 Sun Water website Meander Dam The proposal to dam the Meander River, prompted by a need to support environmental flows, described benefits including providing additional water for expansion of irrigated agriculture, to enable electricity generation from a mini-hydro development and other benefits including flood mitigation, savings from improved water quality/reduced turbidity, and improved recreation opportunities. Reviewing the actual experience, it appears these benefits have arisen, however, additional pipeline construction works (unforeseen in the original CBA) were required to enable farmers across the region to access the additional water. As of 2022, 100% of the irrigation licences available for the increased irrigation water have been sold.5 Thus, the predicted water 5 Tasmanian Irrigation website , information on irrigators and entitlements sold based on accessing webpage 12 July 2022 demand in the CBA appears to have been reasonable but did require additional capital investment to enable the predictions to become reality. Overall, demand for water does appear to have met target, but additional enabling infrastructure spend was required to facilitate this. Wyaralong Dam The Wyaralong Dam was proposed as a means to improve the water security for the people of South East Queensland, stimulated by the millennium drought and the growing population in the region. A multi-faceted strategy was developed to address the predicted demand growth to provide water security for South East Queensland for the forecast period up to 2026. Key components of this strategy included traditional water infrastructure developments (dams and pipelines) and the development of climate-resilient water sources (desalination and recycled water projects). While a number of other components of the plan now contribute to the water supply of the region, the Wyaralong Dam has to date supplied no water and is currently used as a recreation facility. While the lack of demand for water from the dam can be partly attributed to the end of the severe drought and moderated by reductions in water consumption per head, post construction the dam was found to be unable to supply water of sufficient quality to the local community and to the grid without the construction of a water treatment plant, pipelines and pump stations. This capital investment was not within the initial project plans or CBA. Construction of the Wyaralong water treatment plant is reported to be in the early planning stages.6 It would appear that while the demand for water in the South East Queensland region has grown, and continues to grow, growth has been slower than expected and to date has been met from sources other than the Wyaralong Dam. While the dam may be used in the future as a water source for the region, this cannot occur without construction of additional infrastructure beyond that included in the original CBA. Overall, demand for water from this dam does not appear to have met target, and additional enabling infrastructure spend is required before this can occur. 6 SEQWater website Enlarged Cotter Dam Against a background of population growth within Canberra and the ACT more widely, and increasing climate uncertainty, the ACT Government considered a range of initiatives to help secure Canberra and the region’s water supply into the future and unlock the potential to provide water through extended drought periods. The water security plan describes how water supply needed to be increased to meet the assumed population increase, and to reduce the times where severe water restrictions were required, estimating the economic cost of time spent on water restrictions to be $7 million per year for stage 1 temporary restrictions, rising to $324.1 million per year for stage 4 water restrictions (ACTEW, 2009b). Beyond this dam, the region has taken other significant steps to secure water, including constructing the Murrumbidgee to Googong pipeline (completed in 2013), taking steps towards water trading with other parts of the Murray–Darling Basin, and seeking to reduce consumption per capita (ACT Government, 2014). While the region has experienced population growth broadly in line with that forecast, the impact of this on the total demand for water has been moderated by reductions in water consumption per head (both voluntary and driven by permanent water conservation measures) over and above the reductions forecast. Since late 2010 the use of temporary water restrictions of differing levels has been replaced by permanent, year-round measures, similar to stage 1 temporary restrictions in other regions of Australia.7 No further restrictions, over and above these permanent measures have yet been required. The net impact of these factors suggest that the predicted increased demand for water has not been realised to the extent anticipated, due to the success of steps taken to moderate consumption. However, the dam has clearly made a contribution towards the objective of reducing the risk of having to implement severe water restriction measures, and thus has delivered this expected benefit. Overall, while demand for water has increased, the increase is less than anticipated due to the greater than anticipated success of encouraging voluntary water conservation measures. 7 Icon Water Website 6.4 Key lessons Dams provide a complex mix of market and non-market benefits The contexts for proposing new dam developments vary significantly. The five case studies were not just geographically different but were also underpinned by different motivations and priorities. Some focused primarily on irrigated agriculture and regional economic development (including job creation), others focused primarily on providing water security, while others offered a mix of objectives. The dam developments were not always justified by purely financial (and hence easy to monetise) benefits. Non-market, non-financial and social objectives (including water security, food security, etc.) were frequently cited, but are harder to monetise and evaluate directly in CBAs. The prevailing circumstances at the time of the proposal also influenced the way that benefits were framed. For example, urban water security was prioritised more at times of drought. The term ‘monetise’ is defined here to mean assigning a dollar value to a (dis)benefit for purposes of quantitative analysis (without implying that it would necessarily be tradable in a financial transaction). The five case studies in this review were justified by a complex mix of market and non-market benefits. Some adverse impacts were also noted, hence named ‘disbenefits’, relating to reduced recreation opportunities necessary to protect water quality in the dam. While it is never simple to estimate future net benefit flows, quantifying market benefits for inclusion in proposal documents (which included CBAs in some but not all of the case studies selected) is less complex than quantifying non-market benefits. The market and non-market disbenefits and the approaches taken towards evaluating these are summarised in Table 6-3. Market benefits considered in the proposals included supporting and/or expanding irrigated agriculture (Stirling-Harvey redevelopment, Paradise, Meander) and for hydro-electric power (Meander). The monetary value of such expected benefits can be estimated (by predicting volume of demand that could be met from the dam development each year and the likely market prices) and included in the proposal and/or CBA. Table 6-3 Benefits (and disbenefits) included in proposals justifying the five dams reviewed For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 1 As part of wider Stirling-Harvey redevelopment scheme, the New Harvey Dam was to supply water to irrigated agriculture to free up water from the Stirling Dam to increase urban water supply. As the two dams form an integrated scheme, the combined benefits are reflected in this table rather than a simple focus on either dam individually. 2 Project sought to maintain current water supply available for irrigated agriculture by replacing one source for another, rather than increasing quantity/value of agriculture in region. 3 Recreation disbenefits include applying additional restrictions to, or preventing, leisure activities both on water (marroning, fishing, swimming) and on land within the catchments (horse riding, motor rally, trail bikes, off-road driving, hunting). 4 Discounted cashflow estimated, based on quantified net benefit flow, and presented in cost–benefit analysis (CBA). 5 Includes anticipated new cane/bagasse pulp mill and new chicory processing plant. 6 Benefit quantified using input–output (I–O) analysis but not included in CBA calculation of net present value (NPV). 7 Water security is not a key focus of this proposal, but discussion does note that demand for water will increase as the towns and communities in the region expand. 8 Proposal acknowledges that should the dam not be built, current temporary irrigated agriculture water licences would need to be revoked to protect the environmental health of the river. The value of this water to agriculture is incorporated in the CBA, recognising that as the development satisfies the environmental need without sacrificing this flow, then this value is a proxy for this benefit. 9 Estimated value of avoided damages due to reduced flooding, and reduced water treatment costs due to less need for treating turbidity and bacteriological problems. 10 Includes economic growth from improved workforce skills, improved capacity and capability of local firms, enhanced infrastructure and amenities. 11 Based on estimating the economic cost of imposing different levels of temporary water restrictions (from stage 1 to stage 4) and the expected reduction in time when such restrictions were expected to be required. 12 Environmental impact statement (EIS) quantified expected loss in regional gross domestic product (GDP) and jobs if water supply were to fail due to failure to invest in water security project. 13 Increased water security and reliability of supply is described as an important benefit but framed via the lens of supporting agricultural and industrial uses rather than relating to urban drinking water. 14 Potential recreation disbenefits described but mitigation opportunities were considered such that only minor disbenefits were considered likely. Non-market benefits are more complex to quantify in biophysical and/or monetary terms, and could include motivations such as national security, water security, food security, (re)generation of a socio-economically disadvantaged/declining region, increased resilience, etc. The particular non- market benefits anticipated in the five case studies varied significantly with regards to both the particular benefits considered and the estimation methods used. In some examples, attempts were made to quantify such benefits, while other examples discussed the anticipated benefit in the narrative text without attempting to estimate a monetary value for the benefit flow. Benefits that are particularly difficult to reflect in a CBA are those such as offering improved water security against changes in future rainfall patterns or periods of extreme drought. In these instances, the development is in effect like buying insurance – the benefits are intermittent and only apparent in times when a large adverse impact is avoided/mitigated. Estimating the timing and impact of events such as drought using stochastic analyses are particularly prone to error, and so too is estimating the ‘insurance’ benefit (in both ex-post and post-ante analyses) of having additional dam water for such periods. Decision support tools such as net present value (NPV) and CBA are poorly suited to capturing the nuances of such vital, but intermittent, benefits. The case studies, all set in very different contexts, illustrate the challenges in quantifying different benefits (especially the intangible and non-market benefits where the dam acts as a form of insurance). Each dam proposal is trying to forecast the future, where the forecasts are hard to quantify, and harder for some objectives and contexts than others. This is particularly the case for projects where the primary development motivations are hard-to-value objectives (such as improved water security). It is likely that the values included in the analysis will in effect be a more easily monetised benefit that will serve as a proxy for the true underlying benefit. For example, it is easier to estimate the monetary impact of imposing specific water restrictions on businesses operating in a region than to estimate the monetary value of a lack of drinking water in a community at some unknown future date. These issues mean that a single financial metric from CBA is unlikely to be adequate for comparisons across projects in different contexts where different subsets of the full range of benefits may be captured in quantitative analyses. Additional information on the context and non- monetised costs and benefits would ideally be required. Systematic bias in overstating the anticipated net benefits The five cases studies used in this review all revealed varying degrees of discrepancies between forecast and realised future demand for water. This is not surprising; forecasting the future is difficult for the simplest of events, and more so for complex projects with a long useful life. Evaluations of water infrastructure projects need to consider the biophysical (e.g. rainfall, evaporation, river flow, extreme weather events including drought and floods), and socio- economic (e.g. population growth, changes to the mix of industries and agricultural products, economic growth and inflation) outcomes over many years. Furthermore, forecasts are complicated by needing to estimate both the timing and scale of benefits, including how quickly actual demand grows towards its potential. If the complexity of the task were the primary cause of forecasting errors, then an equal mix of under and overoptimistic estimates would be expected. However, the forecasts in the case studies tended to be consistently optimistic, favouring higher benefit–cost ratios (BCRs). This reflected optimism in both the forecast scale of demand once the developments reached their full potential and the rate at which that potential was achieved. Both biases contribute to overestimating the NPV of a project. International literature for ex-post evaluation of investments in public infrastructure provides several possible explanations for errors and biases in CBAs (for projects such as railways, bridges, tunnels and roads, in addition to dams) which are likely to be relevant here (Flyvbjerg et al., 2002, 2005; Nicolaisen and Driscoll, 2014; van Wee, 2007; World Commission on Dams, 2000b). First, there is a risk with all reviews such as this that success bias could influence findings. By definition, ex-post evaluation can only be done on project proposals that have been successful in attracting investment and where the developments actually go ahead. A project where net benefits in the CBA are overstated is far more likely to have been selected than a project that understated net benefits. Thus, a review of ‘successful’ projects is more likely to find over- rather than understated benefits. Secondly, systematic bias can be introduced by the views of and pressures on those preparing the CBA. For example, when an advocate/proponent of the project controls a CBA process, estimates of benefits/demand and of costs may be influenced (deliberately or subconsciously) by a motivation to achieve a desired outcome. That is, the estimated NPV can be influenced by the decisions made regarding which costs and benefits to include in the analysis, and the scale and timing of those costs/benefits, resulting in inflated benefits and/or understated costs (where the desire is to facilitate the project, or the reverse bias if the desire is to obstruct a project). CBAs prepared by independent analysts (agnostic about whether the project proceeds) may appear pessimistic in comparison to those that are prepared by proponents to meet project selection criteria. When reading and comparing CBAs it is therefore important to consider the context within which they were prepared as this can have a substantial influence on their results. Summary of key issues This review highlighted a number of issues with historical use of CBAs for recently built dams in Australia and suggested how they could be more rigorously addressed (Table 6-4). These issues arise because of the complexity of the forecasts and estimates required to plan large infrastructure projects and because of pressures on proponents that can introduce systematic biases. However, this report acknowledges that flaws with the use of CBAs in large public infrastructure investment decisions are not unique to regional Australia or to water infrastructure – they are systemic and occur in many different types of infrastructure globally. Under such circumstances it would be inequitable to apply more rigor to CBAs only for some select investments, geographic regions and infrastructure classes before the same standards are routinely applied in all cases. And there is no incentive for individual proponents to apply more rigor to CBAs if those proposals would suffer from unfavourable comparisons to alternative or competing investments with exaggerated CBRs. In the short term, the main value of the information provided here is to assist in more critically interpreting and evaluating CBAs, realistically framed, so that more-informed decisions can be made about the likely viability (and relative ranking) of projects in practice. In particular, it highlights several aspects of CBAs where the claims of proponents warrant critical scrutiny. In the longer term, this analysis supports many of the similar issues raised in past review cycles of Infrastructure Australia’s CBA best-practice guidelines and the recommendations that are being progressively added to those guidelines to improve how large public investments are evaluated (Infrastructure Australia, 2021a, 2021b). Table 6-4 Summary of key issues and potential improvements arising from a review of recent dam developments For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 7 New infrastructure demand and costs 7.1 Introduction This chapter is intended to serve as a reference of infrastructure costs for the range of components that would be required for new agricultural development in the catchment of the Southern Gulf rivers, both for the component assets required for on-farm development and those for the supporting off-farm infrastructure. It serves three main purposes: (i) to provide a realistic benchmark of the rate of expansion of agriculture for forecasting demand for additional water (and other enabling infrastructure) in Queensland, (ii) to provide benchmark indicators of the realistic costs of infrastructure for those wanting to independently assess the likely viability of development options, and (iii) to collate indicative costs for these different types of infrastructure as a reference for their use in financial analyses in other parts of this Assessment (including chapters 8 and 9). The information presented is particularly necessary given the systematic tendency of proponents of large infrastructure projects (including for new water supplies) to substantially underestimate development costs and overestimate trajectories of demand (see Chapter 6). This chapter also highlights the wide range of infrastructure assets (and associated private and public investors) that would be affected by new agricultural development. For a new scheme to function efficiently, the needs and responsibilities of investors in all keystone infrastructure assets would need to be considered, including the knock-on effects in creating demand for other types of enabling infrastructure. Large infrastructure projects, by their nature, are relatively rare and each has unique characteristics and challenges, making it difficult to extrapolate from one project to another. Even when case-specific details are taken into account, there are some challenges that cannot be known in advance and only become apparent once construction has begun. The costs provided here should therefore be taken as broadly indicative only. Actual costs incurred in any specific development project could differ substantially from those provided. A contingency would need to be factored in on top of the base costs presented to make allowance for these uncertainties. This chapter begins with an overview of growth trajectories in agricultural production and demand for irrigation water in Queensland (Section 7.2) as context for why new infrastructure is required, and the rate at which it may need to be built. The chapter then presents costs for five types of new infrastructure that would be required to support an irrigation development and supply chains for new produce: • development costs of the water and land resources that investors in an irrigation scheme would have to cover (considering both large instream dams and on-farm sources of water) (Section 7.3) • costs of local processing facilities that may be required by new agricultural industries (built by private investors, who could be part of a vertically integrated project or separate investors) (Section 7.4) •costs of transport infrastructure (most likely publicly funded with a contribution fromdevelopers), and transport costs (Section7.5) •costs of electricitytransmission and distribution infrastructure (built by energy providers withdeveloperspayingthe full or partial cost) (Section7.6) •costs of community infrastructure such as schools and hospitals (both publicly and privatelyfunded) (Section7.7). 7.2Agriculturalgrowth and waterdemandtrajectories Tosustainthegrowth of irrigatedagriculture, particularly high-valueand water-intensivehorticulture, in the Southern Gulf catchmentsand therest of Queensland, additional water resources arenecessary.Accurateforecasting of the anticipateddemand growth is crucial for boththe planning of new water infrastructure and the evaluation of individualproposals for such infrastructure. This ensuresthatprojected water demand trajectories and theassociateddiscounted present value generated from new high-value horticulture justifythe costsof theinfrastructure investments. To establish realistic growth trajectoriesfor horticulture inQueensland, historical agricultural production and water-use datafrom the Australian Bureau of Statistics (ABS) wereanalysed. Itshould be noted that thegross valueofagricultural production(GVAP) encompassesboth irrigatedandunirrigated agriculture, while thegross valueofirrigatedagricultural production(GVIAP) focuses solely on irrigated agriculture. Given thathorticulture is predominantly irrigated,thelonger GVIAP dataseries isutilised toestimatewater demand trajectories.Figure7-1illustratesthe growth trends in various agricultural subsectors across Australia andQueensland. Notably, thegrowth trends forthelivestock sector andhorticultural crops inQueensland have outpacedthenational average,whilebroadacre cropproduction growth inQueensland has been comparativelylower. The gross value of horticulture inQueensland has experienced significantgrowth, morethan doublingbetween 1991to2000 (+85%) and 2001to 2010 (+119%), and went up by44% in 2011to 2021. Current growth trajectoriesfor GVAP in Australia (withQueensland values in parentheses) indicatea per-decade increase of 2.7billion (781million) for horticulture, 8.9billion (1.5billion) for broadacrecrops,and 6.8billion (2.1billion)for livestock industries (as shown by step changesin GVAP from 1981–90 to 2011–21inFigure7-1). Horticultural produce isprimarily solddomestically for immediate consumption,necessitating growth in local consumer demand to driveindustry expansion. Therefore, the growth of horticultural industries is constrained by the growthindemand from local consumers. Any new irrigated developmentswould compete for a portion ofthe aforementioned growth values, providing abenchmarkforestimatingthe potential scale of new horticulture within a new irrigation scheme.It alsohelps determine thetrajectoryfor therateat which high-value horticulture andthe associated water demand for high-value, high-prioritywater could grow following the completion of anew irrigation scheme. Chapter7 New infrastructure demand and costs|173 (a) Australia (b) Queensland Trend in gross value of ag production, Aust \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 010,00020,00030,0001981-901991-002001-102011-21GVAP ($M) DecadeCrops (horticulture)Crop (other)Livestock Trend in gross value of ag production, Qld \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 020004000600080001981-901991-002001-102011-21GVAP ($M) DecadeCrops (horticulture)Crop (other)Livestock Figure 7-1 Trends in gross value of agricultural production (GVAP) in (a) Australia and (b) Queensland over 40 years (1981–2021) Data points are decade averages of annual values. The ‘Crop (other)’ category is predominantly broadacre farming. Source: ABS (2022a) The expansion of new horticultural farms is constrained by the seasonal gaps in supply for each crop. As a result, horticulture in a particular location typically involves a combination of products that cater to the specific niche market gaps that can be filled by that location, rather than focusing solely on the cultivation of the most valuable crop. This aspect has significant implications for determining the value of new agricultural production that can financially support and justify the costs associated with publicly funded irrigation schemes. Figure 7-2 illustrates the trends in the GVIAP in response to increasing supplies of irrigation water in Australia. The slopes of the trendlines reflect the increase in gross agricultural production per gigalitre of new water utilised by various categories of Australian agriculture. Each additional gigalitre of water usage can result in the following increases in gross value: • between $2.1 and 3.7 million for the fruit industries • between $5.6 and 10.3 million for the vegetable industries • between $2.5 and 5.0 million for mixed horticulture (combining fruits and vegetables data) • between $0.8 and 1.7 million for a typical mix of agriculture overall. The horticultural segment of proposed irrigation schemes requires careful examination as the financial viability of these schemes is particularly sensitive to assumptions regarding the scale and rate of expansion of this more valuable form of agricultural production. Moreover, horticulture often necessitates higher security water compared to broadacre cropping. Currently, approximately 30% of the total irrigation water utilised in irrigated farming in Australia is allocated to horticultural production (ABS, 2021b). These values serve as indicative benchmarks for estimating the potential gross values that combinations of new agricultural activities could generate when planning new water supplies. (a) Fruits (c) Fruits and vegetables combined (b) Vegetables (d) Total agriculture Trend in gross value of irrigated ag with water applied, fruit \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Trend in gross value of irrigated ag with water applied, fruit and veg \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Trend in gross value of irrigated ag with water applied, vegetables \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Trend in gross value of irrigated ag with water applied, total ag \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 7-2 National trends for increasing gross value of irrigated agricultural production (GVIAP) as available water supplies have increased for (a) fruits, (b) vegetables, (c) fruits and vegetables combined, and (d) total agriculture Source: ABS (2022a) Approximately 25% of the GVAP in Australia is attributed to irrigated agriculture (ABS, 2021b). In the year 2018–19, agriculture consumed a total of 7965 GL of water, accounting for 59% of all water extractions. The majority of this water was utilised for crop irrigation (70%) and pasture irrigation (30%). Among the nearly 8000 GL of water used in 2018–19, 28.6% was sourced from groundwater (2280 GL), 1.5% from recycled water (115 GL), and the remainder from other sources such as rivers, creeks and lakes (ABS, 2021b). Figure 7-3 illustrates the specific irrigation water requirements for different types of horticultural farms, based on current national water usage records. In Queensland, the horticultural farm categories with the highest annual demand for irrigation are ‘nurseries, cut flowers, and cultivated turf’, with an intensity of 4.9 ML/ha, while the remaining four subsectors are not far away from that number (ABS, 2021b). Water application rate by hort type \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGWRA-Charts_Economic.xlsx For more information on this figure please contact CSIRO on enquiries@csiro.au 04812Water application rate (ML/ha) JurisdictionFruit, nut, berriesVegetablesNurseries, flowers, turfGrapevines Figure 7-3 Mean annual water application rate by horticultural type across Australian states and territories Source: ABS (2021b) 7.3 Development costs for land and water resources Establishing new irrigated agriculture would involve the initial costs of developing water and land resources, and additional farm set-up costs for equipment and facilities on each new farm. There are many different options for where and how land and water resources are developed, each of which has implications for cost efficiencies and viability of a greenfield irrigation scheme. The analyses of scheme viability (Chapter 8) are not intended to prescribe particular scheme configurations or development pathways. Instead, the overall evaluation framework was designed to allow flexible comparisons across a wide range of different configurations (Figure 4-1), which required easy substitution of alternative land and water developments used in evaluations. To allow such arbitrary pairings of any land development option with any water development option, the individual options for developing each of these two agricultural resources had to be treated on a like-for-like basis. All water sources are therefore treated on a consistent basis where all capital and operating costs associated with delivering water to the farm at the farmland surface are treated as the costs of that water supply. This means that pumping costs for getting water from a weir to a farm, or pumping costs to lift groundwater to the farmland surface, are treated as costs of the water source (whereas pumping costs to then distribute and apply water on-farm are treated as part of the costs of growing the crop, and were included in the costings of crop gross margins (GMs) in Chapter 5). This section covers the costs of developing new irrigated farms and the on- and off-farm water sources to supply them (following the distinction above in how they are costed). There may be additional costs, beyond those summarised below, to gain rights to land and water, particularly if an Indigenous land use agreement (ILUA) is required. For example, in WA the Ord Final ILUA involved a compensation package worth $57 million to resolve several native title and heritage issues with the Miriuwung Gajerrong peoples over 1450 km2 of land in the Kimberley (Department of Regional Development and Lands, 2009). 7.3.1 Farm establishment costs The costs of developing new enterprises include capital expenditure on establishment and buildings (including approvals), farmland preparation (including clearing), irrigation systems (excluding the water source), and farm machinery and equipment. Capital costs of development are affected by the type of farm being developed, the siting of the farm (particularly soils and topography), the degree to which infrastructure is engineered, and choices about what activities are outsourced (particularly affecting the requirement for expensive packing and storage facilities on horticultural farms, and the requirement for owning specialised farm machinery). Indicative costs are provided for a range of farm development scenarios in Table 7-1. The base cases for broadacre farming are a typical furrow-irrigated farm (on clay soils, including water distribution and tailwater recycling) ($9,800/ha capital cost) and a farm on well-draining soils that would require a more expensive pressurised spray irrigation system (all other costs staying the same) ($13,300/ha). To bracket the range of establishment costs for broadacre crops, two other scenarios were used: a 5000-ha furrow-irrigated farm (capturing economies of scale in being able to use assets more efficiently) ($6,400/ha) and a higher cost spray irrigation development engineered to a higher standard and with complex approvals ($18,100/ha). There are opportunities for very large (5000 ha) farms in the Southern Gulf catchments and the ‘Broadacre scale’ scenario indicates the potential efficiencies that scale can provide. These capital costs are also converted to an annualised equivalent (Table 7-1). Two scenarios are provided as indicators of the range of development costs for horticultural farms, both using high-pressure tape irrigation systems. The lower capital cost scenario (total capital costs $29,200/ha, Table 7-1) is based on direct packing of produce to bins in the field (e.g. for a row crop like melons) and assuming that nearby suitable off-farm accommodation is available for seasonal workers. If farm produce subsequently required grading, packing and cold storage by an off-farm service provider, the savings in upfront capital costs would be offset by additional ongoing costs of production from the outsourced service (that would reduce the farm’s GM). The higher capital cost scenario (total capital costs $81,300/ha, Table 7-1) includes the costs of modern packing and cold storage facilities, and on-site accommodation for seasonal workers (e.g. a remote fruit tree farm). Table 7-1 Indicative development costs for different types of irrigated farms All costs are standardised on a per hectare basis. Broadacre farms were based on a farm size of 500 ha, except for the ‘large scale’ scenario that was 5000 ha. Horticultural farms were based on farm size of 200 ha. The fixed component of maintenance costs was assumed to be 1% of the asset’s initial capital cost per year (and an additional variable cost of maintaining farm machinery and equipment was accounted for in crop gross margins in Chapter 5). A contingency would need to be factored in on top of these costs (e.g. an additional 10%). Equivalent annualised costs are based on a 10% discount rate. Costs of the irrigation water source are considered separately. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: Based on unit costs of component assets from Ash et al. (2018a, 2018b) and Stokes and Jarvis (2021), updated to December 2023 dollar values 7.3.2 Costs for on-farm water sources Indicative costs for a range of scenarios for developing on-farm water sources are presented in Table 7-2. Costings were based on unit costs of component assets from Ash et al. (2018a, 2018b), including the delivery infrastructure to get water from the water source to the irrigation system (but not the costs of the irrigation system itself, which is already accounted for in the farm development costs above). The costs of developing on-farm water sources are highly dependent on characteristics of the location such as topography, soil texture and the success rate of bores. Each water source therefore included a more expensive and a less expensive scenario to illustrate some of this site-to-site variability. When compared on an equivalent basis (per unit area) indicative costs for developing on-farm water sources ranged from $4,300/ha to $16,200/ha (Table 7-2). Note that while the capital costs of developing bores is relatively low, pumping costs are typically high (depending on the total dynamic head (TDH) required to lift water to the soil surface). Likewise, high pumping costs would typically preclude water storages that are sited at a much lower elevation than the fields they are irrigating (noting, from the like-for-like approach described before, that pumping costs to the farm surface are treated here as part of the costs of the water source). The companion technical report on surface water storage (Yang et al., 2024) has much more detail on cost, siting and construction considerations for on-farm water storages, including maps of the locations in the Southern Gulf catchments most suited (topography and seepage) to building them. Table 7-2 Indicative capital costs for developing on-farm water sources (including distribution from source to cropped fields) Adapted from unit costings of farm development scenarios in Ash et al. (2018a, 2018b) and adjusted to December 2023 dollar values. Pumping costs for bores, or water storages that are below the height of the field they are irrigating, should allow about $2 per megalitre per m TDH. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 7.3.3 Cost for large off-farm water infrastructure developments Yang et al. (2024) evaluated some of the more cost-effective dam site locations in close proximity to soils suitable for irrigated agriculture in the Southern Gulf catchments, and the costs for building those dams and associated weir and reticulation infrastructure required to deliver that water to farms. Using information from Yang et al. (2024) and Devlin (2024), indicative costings are presented for three hypothetical irrigation schemes based on two representative dam site locations (Table 7-3), with nominal cost estimates for the hypothetical site on the Gregory River presented at two FSL, where at the larger FSL the reservoir would inundate the Boodjamulla (Lawn Hill) National Park. These data indicate that large dams, together with supporting off-farm infrastructure, could supply water to new enterprises at a capital cost of about $55,000 to $120,000/ha of new irrigated farmland. Table 7-3 Indicative capital costs for developing three irrigation schemes based on the most cost-effective dam sites identified in the Southern Gulf catchments FSL = full supply level For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: Dam and weir costings are based on data from Yang et al. (2024) and reticulation costings are based on a per hectare rate from Devlin (2024) and include contingencies; see that report for full details of cost breakdowns and assumptions The development of new agriculture would have flow-on consequences for local supply chains and demand for supporting infrastructure. These are considered in the following sections. 7.4 Processing costs 7.4.1 Dependence on new local processing facilities Due to the low value of some unprocessed farm commodities, particularly industrial crops like cotton and sugarcane, local processing is required for the total supply chain costs to be viable. This was demonstrated in the narrative risk analysis presented before that illustrated the influence of distance to gin on cotton GMs (Section 5.2.1). Sugarcane is even more reliant on local processing, because the unprocessed cane weighs about seven times as much as the processed sugar. For example, transporting sugarcane 100 km would cost about $28/t (see Table 7-6), more than half the gross cane revenue (currently about $50/t). Investors in new local processing facilities would require economies of scale and security of supply (e.g. that farmers would not switch to other crops below the scale threshold) in order for their investments to be viable, and these would be essential considerations in the overall planning of a new irrigation scheme for these types of commodities. 7.4.2 Meatworks Meat processing capacity is concentrated in south-east Queensland and on the eastern coast. Many cattle properties across northern Australia do not have access to local meatworks and have to transport cattle long distances (>1000 km) for processing (if they are not sold for live export). There have been several feasibility studies for the construction of abattoirs in western Queensland (e.g. Cloncurry, Hughenden, Roma) and other parts of northern Australia (e.g. Broome). A study by Meateng (2011) estimated the cost of constructing an abattoir at Broome would be around $33 million with an operational capacity of 100,000 head/year. Another study (Meateng, 2018) estimated the cost of constructing a 100,000 head/year abattoir in north-western Queensland to be about $100 million (not including the provision of land, power, water and road access) with operating costs of about $330/head. However, there has been a long history of meatworks being established in the NT but then struggling to remain viable. For example, Australian Agricultural Company’s Livingstone Beef processing facility (situated about 50 km south of Darwin) has not been active since 2018. If the beef industry in the Southern Gulf catchments were to develop a boxed-meat market of sufficient scale, reviving a mothballed meatworks would probably be a more likely scenario than building a new one. 7.4.3 Cotton gin Indicative costs are provided for a cotton gin with maximum capacity of about 1500 bales/day (Table 7-4). Unprocessed seed cotton contains about 40% cotton lint, meaning that processed cotton bales are much lighter and cheaper to transport. Cotton seed is a by-product that can be used as a livestock feed supplement, with a ready market in the local Southern Gulf catchments cattle industry: trucks taking unprocessed cotton modules to the gin could return with cotton seed. The value of the cotton seed is generally about equal to the costs of processing charged to the grower. Harvested cotton can be stored, but susceptibility to spoilage in wet weather limits the length of the ginning season. An important consideration in remote locations would be how to power a new gin. A minimum area of about 15,000 ha irrigated cotton would be required to reach the scale of production necessary for a new gin to be viable. Higher cotton prices increase the distance that farms can profitably transport modules to the gin (Section 5.2.1), which increases the catchment area of a gin to attain threshold levels of supply, thereby increasing the chance of a cotton gin (and associated new cotton industry) navigating the challenging early years to become sustainable and profitable. Table 7-4 Indicative capital and operating (fixed and variable) costs for a cotton gin from two sources For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source 1: Rick Jones, Queensland Cotton (August 2017, pers. comm.); Stokes et al. (2017), adjusted to December 2023 prices Source 2: PwC (2019) (with input assumptions also from Queensland Cotton), adjusted to December 2023 dollar values 7.4.4 Sugar mill The amount of sugar that can be recovered by mills from harvested irrigated sugarcane is typically up to about 15% by mass, a ratio known as the CCS (commercial cane sugar). Sugar mills are costly processing facilities that, depending on how they are configured, can produce different mixes of a range of products: sugar, molasses, renewable fuels (e.g. ethanol, biogas/methane or hydrogen), and/or baseload renewable power (from bagasse, the remaining fibre after crushing) (Jackson, 2013). Cane has to be crushed as it is harvested, so crushing operations are constrained by farming practices and trafficability of harvested fields (typically a 6-month crushing season between about mid-June and mid-December for irrigated cane). The standard practice in current sugarcane growing regions of Australia is for mills to pay for cane at the farm gate using a pricing formula that takes into account the quality (CCS) of the cane and the current sugar price (prices in $/t): cane price = raw sugar price × (CCS – 4%) × 90%. (i.e. millers get the first 4 units of sugar extracted and 10% of the rest; growers get paid the value of 90% of sugar extracted above the first 4 units). Processing of cane adds about 50% value in the sugar produced alone, and the bagasse (about 15% fibre) would be able to generate about 0.08 MWh of exported energy per tonne of cane (about another 15% to 30% value added to the value of the unprocessed cane). With appropriate management, including for pre-harvest water stress, irrigated cane reaches its peak quality around mid-November, and drops off rapidly either side of that date (with lower CCS and higher water content). Indicative costs are provided below for a large sugar mill capable of processing about 1000 t cane per hour, or about 4 Mt cane per year (for a 6-month crushing season and 90% mill reliability) (Table 7-5). Cane is first milled through crushers to separate the juice from the moist fibre (bagasse). Bagasse combustion produces steam to power the mill (and excess energy can be used for electricity generation). Juice is clarified to remove impurities before evaporating off water by boiling under partial vacuum. Crystallisation of sucrose occurs by further boiling, crystal seeding and centrifuging. Sugar and fibre can be further processed to produce ethanol. Throughput rates at different stages of processing depend on the quality of the cane, and hence affect the optimal configuration of mill components. Sugar mills are very large capital investments (about $470 million capital cost) and require a larger scale of farming than cotton to provide sufficient supply to justify such an investment. A minimum area of about 25,000 ha under irrigated sugarcane would be required to reach the scale of production necessary for a new mill to be viable. The information on costs of sugar mills and the scale of production required to support them is provided to show why sugarcane farming is not practicable in the Southern Gulf catchments despite the crop itself being agronomically suited to growing in these environments (and why sugarcane was therefore excluded from the set of crop options that were analysed in Part II of this report). Table 7-5 Indicative capital and operating costs for a basic sugar mill capable of processing 1000 t cane per hour Costs for cogeneration of electricity or ethanol production would be additional. Costs of each mill component depend on the quality of cane being processed (assumed 15% commercial cane sugar (CCS), 15% fibre and 70% water content). See Jackson (2013) for a more detailed account of sugarcane processing. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: Stokes et al. (2017), adjusted for inflation to December 2023 dollar values 7.5 Transport costs Indicative freight costs were estimated using the Transport Network Strategic Investment Tool (TraNSIT). TraNSIT (Higgins et al., 2015) is a modularised tool that uses detailed spatial information on the road (and rail) network in Australia (Figure 7-4) together with supply chain data on the movement of goods along this network for each agricultural industry. Freight estimates are based on detailed bottom-up modelling of the costs incurred by trains and trucks of different size classes moving different types of products along the transport network. It should be noted that in practice, however, the actual prices charged to customers may not be split evenly in covering the trucking/rail costs of a round trip. Costs can be higher for the leg of the journey for which there is most demand and lower on the return leg (particularly if ‘backloading’ rates are charged on routes where some trucks would otherwise return empty or with loads below capacity). Costs for long- distance trips (>1 day permitted driving time) do not scale completely linearly, as there are step changes each time the route crosses a threshold that requires drivers to take an overnight break. Figure 7-4 Road layer used in TraNSIT, showing road ranks and heavy vehicle restrictions Truck classes listed from shortest to longest in legend (left to right). Transport costs between Mount Isa and key markets and ports are shown in Table 7-6 (with routes show in Figure 7-5). Transporting cattle from Mount Isa to Darwin would cost about $218/t and a further $0.25 per tonne per kilometre for the portion of the trip on the unsealed roads from within the Southern Gulf catchments to Mount Isa. Estimated refrigerated freight costs to southern capital city markets (e.g. for most horticultural produce) range from $337/t (Brisbane) to $426/t (Sydney). There would likely be opportunities for reduced backloading rates from Mount Isa southwards for underutilised trucks on the return leg from supplying retail distribution centres in Brisbane. Cost estimates do not include the disruptions from road closures that can cut off routes or require detours. The road network within the Southern Gulf catchments is susceptible to wet-season flooding. Table 7-6 Indicative road transport costs between the Southern Gulf catchments and key markets and ports The top section of the table gives trip costs from Mount Isa to key destinations. The bottom section gives distance- based costs of getting goods from within the catchments to Mount Isa (on unsealed roads) and approximate distance- based costs on sealed roads (to other destinations not specifically listed). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au National freight path map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-512_TraNSIT_Aus_routes_v01.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 7-5 Freight paths from Mount Isa to key ports and southern markets The freight path depends on the vehicle selection and heavy vehicle access (see Figure 7-4). Upgrading road networks can be an important enabler of regional development, improving the cost efficiencies and reliability of trucking routes. The cost of such upgrades, however, is substantial and highly variable depending on the route-specific works and bridges required. The Northern Australia Beef Roads Programme provided indicative costs of road upgrades across a range of scenarios (CSIRO, 2016; all prices quoted in this paragraph are adjusted to December 2023 dollar values). For example, widening (9 m width) and sealing an existing unsealed road to state road standards was estimated to cost about $1.25 million/km (excluding bridges) in north- west Queensland. Construction costs of road upgrades could exceed $2.4 million/km in some cases, particularly when widening of floodways was required. Estimates of construction costs were as low as $310,000/km for roads with lower volumes of traffic. In the NT, the cost of construction was about $980,000/km for upgrading narrow sealed beef roads to two-lane sealed roads with flood immunity (e.g. Tableland Highway). Similar upgrades for beef roads in WA (e.g. Wyndham Spur) involving widening to 11 m, re-alignments and lengthening of culverts were estimated to cost about $1.8 million/km. The most expensive proposed upgrades were bridges and floodways, with a total cost of about $137 million for five bridges along the Great Northern Highway (WA). Upgraded roads improve travel times (e.g. 80 to 100 km/h), improve safety, reduce vehicle maintenance costs and reduce frequency of road closures. 7.6 Energy infrastructure costs Obtaining cost estimates for transmission infrastructure connections can be challenging, as costs are often borne by private companies and cost information is not shared publicly. Reliable cost data are also highly dependent on the location and requirements of the facility or load to be connected. A collaborative study by the CO2CRC (a Cooperative Research Centre (CRC) investigating carbon capture and storage technologies) and authored by the Electric Power Research Institute (EPRI, 2015) compiled energy infrastructure costs from a wide range of industry, government and research sources to develop estimates for its levelised cost of energy (LCOE) methodology. This study provides credible technology cost and performance data and projections for Australian electricity over the period 2015 to 2030. It contains data ‘building blocks’ to use for policy and investment decisions and for further modelling of Australian electricity generation options. For a wide range of technologies, the study includes current and projected capital costs, operation and maintenance costs, and detailed performance data (EPRI, 2015). This reference has been heavily relied upon in the summary of electricity infrastructure costs below (with prices adjusted to December 2023 dollar values). Transmission and distribution lines The delivery of electricity typically starts at a power generator from where a step-up transformer converts the electricity to higher voltages for more efficient long-distance transmission. Transmission lines provide for the bulk flow of electrical energy from generation sources to substations closer to end users, where step-down transformers convert the electricity to lower voltages for distribution. Distribution lines deliver electricity to consumers at voltages ready for use. The complex interconnected network of transmission lines, substations, distributions lines and control and conversion systems is often referred to collectively as a grid. High voltage (HV) transmission lines (132 to 330 kV lines with 50 to 3500 kVA power transfer capability) generally provide the backbone of Australian electricity transmission systems and deliver bulk energy directly from regional generation centres to load centres (EPRI, 2015). Lower voltage transmission lines (110 to 132 kV) are typically used to service mixed loads of residential, commercial and industrial demands and connect to the backbone 220 to 330 kV lines at bulk supply points that interface with the distribution network. Large industrial facilities such as mines, smelters and refineries can be directly connected to 220 to 330 kV transmission lines due to their high load requirements (100 to 900 MW). For HV transmission lines, there is also a wide range of nominal voltage levels and thermal capabilities between transmission lines from 132 to 330 kV, which can further vary final costs. For example, 132 to 330 kV transmission line costs can be $0.34 to $1.57 million per km depending on the voltage level and number of circuits, and the substation and switchgear can range from $10 million to $55 million depending on the arrangement of the substation (EPRI, 2015). An important consideration for the capital costs of network connection for both new generators and new loads is the influence of peak loads on capital costs. For generators, siting new power stations close to the existing grid can lower connection costs, but may constrain the technology options (EPRI, 2015). EPRI (2015) states that, ‘To use the full output of low-utilisation generators (such as intermittent renewables or peaking gas plants), network connections must be built to the peak capacity even though they might be used for only 20% to 40% of the time on average. Because connection costs have to be paid by the developer, this precludes all but short lines connecting to the existing grid without increasing an installed project’s LCOE. Traditional baseload generators may justify longer connections to the grid.’ This is true also for new load customers; their distribution lines must be sized to peak loads, even though there may be large portions of the day when the line is not delivering to capacity. Use of on-site storage may go some way to mitigate this, but the costs of on-site storage would need to be balanced with the avoided cost of capital for the larger distribution network capacity. Table 7-7 below provides some indicative transmission and distribution line costs from the EPRI study (EPRI, 2015). The 11 to 66 kV lines are most likely large enough and therefore most relevant for the kinds of developments likely to progress in the Southern Gulf catchments. Others have been included for the cases where projects may be economic for including larger cogeneration or renewables developments. Table 7-7 Indicative costs of transmission and distribution lines, for sizes relevant to this Assessment Acquisition of land and easement for the lines would be an additional cost. Costs are a rough guide only since they vary considerably depending on details of individual cases. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au †megavolt ampere (MVA) = 1 megawatt (MW) Source: EPRI (2015), adjusted for inflation to December 2023 dollar values Transformers Substations connect two transmission or distribution lines of different voltage levels. Substations consist of transformers and associated switchgear and are a substantial part of the costs of connecting to the transmission system for a new-entrant generator (Table 7-8). Table 7-8 Indicative costs of transformer, for sizes likely to be relevant to developments in the Assessment area Transformers are categorised by the voltage pairs that they convert between. Excludes switchgear costs. na = not applicable. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au †megavolt ampere (MVA) = 1 megawatt (MW) Source: EPRI (2015), adjusted for inflation to December 2023 dollar values 7.7 Community infrastructure costs The availability of community services and facilities in remote areas can play an important role in attracting or deterring people from living in those areas. If local populations increase as a result of new irrigated developments, then demand for public services would increase in the region, and provision of those services would need to be anticipated and planned. Indicative costs for constructing a range of different facilities that may be required to support this growth are listed below (Table 7-9). Healthcare services in remote locations generally focus on primary and some secondary care, while the broadest range of tertiary services are concentrated in ‘principal referral hospitals’ that are mainly located in large cities but serve large surrounding areas by referral (AIHW, 2015). Each 1000 people in Australia require 2.3 (in ‘Major cities’) to 4.0 (in ‘Remote and Very remote areas’) hospital beds served by 16 full-time equivalent (FTE) hospital staff and $3.5 million/year funding to maintain current mean national levels of hospital service (AIHW, 2023). Table 7-9 Indicative construction costs for different types of community facilities in Darwin Costs in remote areas like the Southern Gulf catchments are estimated to be about 30% to 60% higher than those quoted for Darwin. Cost ranges in columns two and three are per square metre; costs in the last two columns are per hospital bed, house or apartment. na = not applicable. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au †GFA = gross floor area, the sum of covered and uncovered floor areas CBD = central business district Source: RLB (2021), adjusted for inflation to December 2023 dollar values Based on a small sample size, the indicative cost for building a new school is $11.3 million per school or about $31,000 per student (Table 7-10). For a larger sample size, the 2017 Queensland infrastructure plan (DILGP, 2017) (adjusted to December 2023 dollar values) valued total public education assets for the state at $21.7 billion for 1239 state schools catering for 581,000 students. It is not clear on what basis the assets were valued, but these values equate to $17.5 million per school or $37,000 per student (which are slightly higher than the costs for the small sample of new schools). Demand for community services is growing both from population increases in Australia and rising community expectations (DILGP, 2017). New infrastructure that is built to service that demand would occur irrespective of what development occurs in particular parts of the country. However, if new irrigation projects shift some people to live in more remote parts of Australia, then this could shift the locations of where some services are delivered and associated infrastructure is built. The costs of delivering services and building infrastructure is generally higher in more remote locations. So, the net cost of any new infrastructure that is built to support regional developments is the difference in cost of shifting some infrastructure to more remote locations (not the full cost of facilities that would otherwise have been built elsewhere). Table 7-10 Indicative construction costs for new schools For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Source: Stokes et al. (2017) based on all schools built between 2002 and 2017 in WA, NT and Queensland (Qld) for which construction costs could be found; updated to December 2023 dollar values 8 Financial viability of new irrigated development 8.1 Introduction Large new infrastructure projects in Australia are increasingly expected to be more accountable and transparent. This trend extends to planning and building of new water infrastructure, and the way water resources are managed and priced (e.g. Infrastructure Australia, 2021a, 2021b; NWG, 2022, 2023), including greater scrutiny of the costs and benefits of potential large new public dams. Large infrastructure projects, such as any new irrigation developments in the catchment of the Southern Gulf rivers, are complex and costly investments. The difficulty in accurately estimating costs and the chance of incurring unanticipated expenses during construction, or not achieving projected water demand and revenue trajectories when completed, put the viability of developments at risk if they are not thoroughly planned and assessed (as discussed in Chapter 6). This chapter therefore provides financial tools to assist in planning and evaluating irrigated development options (and easily comparing alternative configurations). New irrigation schemes in the Southern Gulf catchments would be costly to develop, so many technically feasible options are unlikely to be profitable at the returns and over the time periods expected by many investors. The amount of area in the Southern Gulf catchments that it would be technically feasible to farm (in terms of the scale of suitable land and water resources) is vastly greater than the area where it would be commercially sensible to do so. For example, the current area of irrigated agriculture in tropical Australia west of the Great Dividing Range uses less land area than mining (both <0.1%) (Watson et al., 2021a). Ultimately, financial factors will determine the types and scale of development. This chapter continues the overarching multi-scale agricultural viability framework introduced in Figure 4-1. Part II provided a bottom-up evaluation of farm performance for different crop options and this chapter provides a top-down analysis to determine the farm performance that would be required to pay for different ways of developing farms and water resources. The costs of developing water and land resources vary widely depending on a range of case- specific factors that are dealt with in other parts of this Assessment. These factors include the nature of the water source, the type of water storage, geology, topography, soil characteristics, the water distribution system, the type of irrigation system, the type of crop to be grown, local climate, land preparation requirements and the level to which infrastructure is engineered. The scale and pathways of development are therefore uncertain, so the analyses in this chapter were designed to be flexible and able to accommodate very different scales and configurations of development options. Rather than analysing the cost–benefit of specific irrigation scheme proposals, this chapter presents generic tables for evaluating multiple alternative development configurations, providing threshold farm gross margins and water costs/pricing that would be required to cover infrastructure costs. These provide a powerful (if slightly abstract) set of tools that allows users to answer their own questions about whether various aspects of agricultural land and water developments could be financially viable in the Southern Gulf catchments. Some examples of the questions that can be asked, and which tools to use to answer them, are summarised below (Table 8-1). Table 8-1 Types of questions that users can answer using the tools in this chapter For each question the relevant table number is given, together with an example answer for a specific development scenario. More questions can be answered with each tool by swapping around the factors that are known and the factor being estimated. (All initial estimates assume farm performance is 100% in all years (i.e. before accounting for risks). See Table 8-2 for supporting generalised assumptions. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au The next section describes the ‘discounted cashflow’ (DCF) analysis approach used in financial analyses (Section 8.2). As set out in the rationale above, rather than using the DCF for a traditional cost–benefit analysis (CBA) of specific development proposals/scenarios (as in Chapter 6) the analyses are used in a less prescriptive way to provide flexible tools that allow users to evaluate their own development scenarios. The analyses are first used to calculate the water price that irrigators can afford, as a useful common point of reference in subsequent analyses for identifying water sources that farms could pay for (Section 0). Analyses then consider the case of irrigation schemes built around a large dam and associated supporting off-farm infrastructure (Section 8.4). Then the case of self-contained, modular farm developments, with their own on-farm source of water, is considered (Section 8.5). The next section considers how different types of risks would affect the viability of irrigation schemes and provides adjustment factors that can be applied to previous analyses to account for the effects of these risks (Section 8.6). The chapter concludes by summarising the opportunities and principles for achieving sustainable and viable new irrigation developments in the Southern Gulf catchments (Section 0). 8.2 Balancing scheme-scale costs and benefits Designing a new irrigation development in the Southern Gulf catchments would require balancing three key determinants of irrigation scheme financial performance to find combinations that might collectively constitute a viable investment. The determinants are: 1. farm financial performance (relative to development costs and water use) (Chapter 5) 2. capital cost of development, for both water resources and farms (Chapters 7) 3. risks (and associated required level of investment return) (Section 8.6). Other factors were limited as much as possible, restricting these to factors with greater certainty and/or lower sensitivity, so that the results can be applied to a wide range of potential development scenarios. 8.2.1 Terminology Scheme financial evaluations use a DCF approach to evaluate the commercial viability of irrigation developments. The approach, following that of Stokes and Jarvis (2021), is intended to provide a purely financial evaluation of the conditions required to produce an acceptable return from an investor’s perspective. It is not a full economic evaluation of the costs and benefits to other industries, nor does it consider ‘unpriced’ impacts that are not the subject of normal market transactions, or the equity of how costs and benefits are distributed. (Non-market impacts are covered in the companion technical reports on ecological assets (Merrin et al., 2024) and ecological modelling (Ponce Reyes et al., 2024). For the discussion that follows, an irrigation scheme was taken to be all the costs and benefits from the development of the land and water resources to the point of sale for farm produce. The DCF was applied in a non-standard generic manner to back-calculate threshold criteria for different development configurations to break even (rather than the traditional CBA approach of estimating financial performance of a few specific, detailed options). The section below explains the terminology and standard assumptions used. A ‘discounted cashflow’ (DCF) analysis considers the lifetime of costs and benefits following capital investment in a new project. Costs and benefits that occur at different times are expressed in constant real dollars (December 2023 dollars) with a discount rate applied to streams of costs and benefits. The ‘discount rate’ is the percentage by which future costs and benefits are discounted each year (compounded) to convert them to their equivalent present value. For an entire project, the ‘net present value’ (NPV) can be calculated by subtracting the present value of the stream of all costs from the present value of the stream of all benefits. The ‘benefit– cost ratio’ (BCR) of a project is the present value of all the benefits of a project divided by the present value of all the costs involved in achieving those benefits. To be commercially viable (at the nominated discount rate), a project would require an NPV that is greater than zero (in which case the BCR would be greater than one). The ‘internal rate of return’ (IRR) is the discount rate at which the NPV is zero (and the BCR is one). For a project to be considered commercially viable, it needs to meet its target IRR, where the NPV is greater than zero at a discount rate appropriate to the risk profile of the development and alternative investment opportunities available to investors. A target IRR of 7% per annum is typically used when evaluating large public investments (with sensitivity analysis at 3% and 10%) (Infrastructure Australia, 2021b). Private agricultural developers usually target an IRR of 10% or more (to compensate for the investment risks involved). A back-calculation approach is used in the tables below to present threshold GMs and water prices that are required for investors to achieve specified target IRRs (therefore, equivalently, NPV is zero at these discount rates). For the private investor, determining the target IRR appropriate for a specific firm undertaking a specific project requires the investor to understand their weighted average cost of capital (WACC), and the relative risk of the project compared to the firm’s existing project portfolio. Cost of capital theory is complex, and forms an important underpinning of corporate finance, investment and capital budgeting theory and practice, and is supported by a significant body of academic literature. Simplistically, the WACC reflects the risk adjusted cost to the firm of sourcing the funds that are used to acquire assets or fund projects, where the funds can be sourced from a variety of sources, ranging from pure equity to pure debt (Modigliani & Miller, 1958). The cost of equity (typically estimated using the capital asset pricing model) estimates the return that shareholders require in return for investing in the firm and incorporates the expected return on the shares and the risk premium required by investors for holding the firms shares rather than holding risk-free investments, while the cost of debt reflects the return lenders require for the provision of debt funding. Thus, the WACC will vary as perceived levels of risk vary, across investments undertaken by the same firm, and across different investing firms. The implication of this for firms considering investment in water resource development projects is that their target IRR may vary from project to project as the relative risks of different projects vary. Accordingly, project proponents should estimate their WACC on a case-by-case basis, to determine their target IRR, with their target IRR being at least equal to their risk adjusted WACC for the project. This report presents tables based on an indicative target IRR of 10%; recognising that the appropriate target for project proponents in different scenarios may be in excess of this indicative level. ‘Project evaluation periods’ used in this chapter matched the ‘life spans’ of the main infrastructure assets: 100 years for large off-farm dams and 40 years for on-farm developments. To simplify the tracking of asset replacements, four categories of life spans were used: 15 and 40 years for farms and 25 and 100 years for off-farm infrastructure. It was assumed the shorter life span assets would be replaced at the end of their life, and costs were accounted for in full in the actual year of their replacement. At the end of the evaluation period, a ‘residual value’ was calculated to account for any shorter life span assets that had not reached the end of their working life. Residual values were calculated as the proportional asset life remaining multiplied by the original asset price. Discounted residual values were trivially small (because the evaluation period matched the life spans of the principal, dominant, longer life span assets) and hence analyses were not sensitive to the choice of method for how they were calculated. ‘Capital costs’ of infrastructure were assumed to be the costs at completion (accounted for in full in the year of delivery), such that the assets commenced operations the following year. In some cases, the costs of developing the farmland and setting up the buildings and equipment were considered separately from the costs of the water source, so that different water sources could be compared on a like-for-like basis. Where an off-farm water source was used, this was treated as a separate investor receiving payments for water at a price that the irrigator could afford to pay. The main ‘costs for operating’ a large dam and associated water distribution infrastructure are fixed costs for administering and maintaining the infrastructure, expressed here as percentage of the original capital cost, and variable costs associated with pumping water into distribution channels. At the farm scale, fixed overhead costs are incurred each year whether or not a crop is planted in a particular field that year. ‘Fixed costs’ are dominated by the fixed component of labour costs but also include maintenance, insurance, professional services and registrations. An additional allowance is made for annual operation and maintenance (O&M) budgeted at 1% of the original capital value of all assets (with an additional variable component to maintenance costs when machinery was used for cropping operations). A ‘farm annual gross margin’ (GM) is the difference between the total revenue from crop sales and variable costs of growing a crop each year. ‘Net farm revenue’ is calculated by subtracting fixed overhead costs from the GM. ‘Variable costs’ vary in proportion to the area of land planted, the amount of crop harvested and/or the amount of water and other inputs applied. Farm GMs can vary substantially within and between locations, and as socio-economic conditions change over time, as described in Chapter 5. GMs presented here are the values obtained before subtracting the variable costs of supplying water to farms these water supply costs are instead accounted for in the capital costs of developing water resources. Equivalent unit costs of supplying each megalitre of water are presented separately below. 8.2.2 Threshold gross margins and water pricing to achieve target IRRs Financial analyses in this chapter used a generic approach to explore the consequences of variation for development costs and other key factors that determine whether or not an irrigation scheme would be viable (e.g. farm performance and the level of returns sought by investors). The analyses used the DCF framework described above to back-calculate and fit the water prices and farm GMs that would be required for respective public (off-farm) and private (irrigators) investors to achieve their target IRRs. The results are summarised in tables showing the threshold that must be met for a particular combination of water development and farm development options to meet investors’ target returns. The tables allow viable pairings to be identified based on either threshold costs of water or required farm GMs. Financial viability for these threshold values was defined and calculated as investors achieving their target IRR (or, equivalently, that the investment would have an NPV of zero and a BCR of one at the specified discount rate). 8.2.3 Accounting structure Analyses first consider the case of irrigation schemes built around public investment in a large off- farm dam in one of the Southern Gulf catchments. They then consider the case of developments using on-farm dams and bores. Cost and benefit streams across the scheme were tracked for the separate components described in Figure 8-1. For farms, the streams were the: (i) capital costs of land development, farm buildings and equipment (including replacement and maintenance costs, and residual values); (ii) fixed overhead costs, applied to the full area of developed farmland; and (iii) total farm GM (across all farms in the scheme), applied to the mean proportion of land in production each year (Figure 8-1). If a development scenario used an ‘on-farm water source’, then the costs of building and operating that water source were added to the overall farm costs (in the three categories above). Farm developers were treated as private investors who would seek a commercial return. When an ‘off-farm water source’ (large dam >25 GL/year) was evaluated, it was treated as a separate public investor paid by farmers for water supplied (which served as an additional stream of costs for farmers and a stream of benefits for the water supplier at their respective target IRRs). For the public off-farm developer, the streams of costs were: (i) the capital costs of developing the water and associated enabling infrastructure (including replacement and O&M costs and residual values), and (ii) the costs of maintaining and operating those assets (Figure 8-1). Accounting within a water infrastructure CBA needs to rigorously associate each benefit with all the costs and land and water resources used to attain it, and conversely, ensure that each cost and use of resources flows through to the benefit that is generated. To assist with such accounting, it is useful to have a framework that clearly defines the bounds of the overall irrigation development and of the component investments with it (Figure 8-1). For the purposes of this analysis, the irrigation scheme is defined as all the costs, benefits, use of land and transfers of water from when water is extracted by the scheme until agricultural produce is transported to, and revenue received at, the point of sale. The water source could either be part of a single on-farm investment (the green highlighted section of Figure 8-1, where water would be supplied from on-farm dams or bores), or there could be additional separate investors in the off-farm water infrastructure development (mainly in the blue highlighted section of Figure 8-1, where water would be supplied from a large off-farm dam and farms would pay the operator of the dam and water reticulation infrastructure). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Figure 8-1 Financial structure of irrigation scheme used in accounting for costs, revenue and use of land and water resources Standardised accounting rules allow analyses to interchangeably pair any on-farm or off-farm water source with any farm development option. For on-farm water sources, no off-farm water infrastructure would be required, only supporting infrastructure such as roads and electricity supplies (blue highlighted section). O&M = operation and maintenance. 8.2.4 Assumptions To keep the results as relevant as possible to a wide range of different development options and configurations, the analyses here do not assume what scale a water development would be. Instead, all costs are expressed (i) per hectare of irrigated farmland, and (ii) per megalitre per year of water supply capacity, facilitating comparisons between scenarios (that can differ substantially in size). Section 7.3 provided illustrations of how this approach was used for indicative costing of a range of farmland development options, on-farm water sources, and for the off-farm infrastructure costs for developments configured around the two most cost-effective dam sites in the Southern Gulf catchments. Those capital costs of development are referred to extensively in the analyses below. To enhance like-for-like comparisons across different development scenarios, a set of standard assumptions are made about the breakdown of development costs (by life span) and associated ongoing operating costs (Table 8-2). Three indicative types of farming enterprise represent different levels of capital investment associated with the intensity of production and the extent to which farming operations are performed on-farm or outsourced (Table 8-2). Capital costs and fixed costs are higher for horticulture than broadacre farming, but the more expensive irrigation systems used (such as drippers) apply water more precisely and efficiently to crops. The indicative Broadacre farm could, for example, represent hay or cotton farming using furrow irrigation on heavier clay soils. The indicative capital-intensive Horticulture-H farm could, for example, represent high-value fruit tree orchards with a high standard of on-farm packing and cold room facilities, and include accommodation for seasonal workers travelling to the remote Southern Gulf catchments farms. The indicative less capital-intensive Horticulture-L farm option could, for example, represent a row crop like melons, with packing directly to bins and using off-farm accommodation for seasonal workers (which reduces the upfront capital cost of establishing the farm, but increases ongoing costs for outsourced services that reduces farm GMs). For consistency, all costs required to deliver water to the farm at the level of the soil surface are treated as the costs of the water source (so different water sources can be substituted for each other on a like-for-like basis: see Section 7.3). Subsequent farm pumping costs to distribute and apply the supplied water to crops are treated as part of the variable costs of growing crops and are already accounted for in the crop gross margins presented in Section 5.2. Pumping costs for the water source are highly situation-specific for different water sources. In particular, these pumping costs are affected by the elevation of the water source relative to the point of distributing to the farm, for example, the height water needs to be pumped from a weir to a distribution channel, from a farm dam to a field, or the dynamic head required to lift bore water to the field surface. For this reason, water source pumping costs are not included in summary tables of water pricing but should be added separately as required at a cost of about $2 per megalitre per metre dynamic head (which is mainly a consideration for groundwater bores, but also applies where water needs to be lifted from rivers or irrigation channels). For more information on water infrastructure costs see Chapter 6 (and companion technical reports referenced there) and for crop GMs see Chapter 5. Analyses presented below first consider the case of irrigation schemes built around a large dam and associated supporting off-farm infrastructure (Section 8.4). Then the case of self-contained, modular farm developments with their own on-farm source of water is considered (Section 8.5). For both cases, the water price that irrigators can afford provides a useful common point of reference for identifying suitable water sources that different farm developments would be able to pay for (Section 0). Initial analyses assumed all farmland was in full production and performed at 100% of its potential (including 100% reliable water supplies) from the start of the development. Section 8.6 then provides a set of adjustment factors that quantify risks of several sources of anticipatable underperformance. Table 8-2 Assumed indicative capital and operating costs for new off- and on-farm irrigation infrastructure Three types of farming enterprise represent a range of increasing intensity, value and cost of production. Indicative base capital costs for establishing new enterprises (excluding water costs) allow on- and off-farm water sources to be added and compared on an equal basis. Annual operation and maintenance (O&M) costs are expressed as a percentage of the capital costs of assets. The Horticulture-H farm with higher development costs includes on-farm packing facilities, cold storage and accommodation for seasonal workers. The Horticulture-L farm with lower development costs does not include these assets and would have to outsource these services if required (reducing the farm gross margin). IRR = internal rate of return. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 8.3 Price irrigators can afford to pay for a new water source Table 8-3 shows the price that the three different types of farms would be able to afford to pay for water, while meeting a target 10% IRR, for different levels of farm water use and productivity. For prices to be sustained at this level throughout the life of the water source, the associated farm GM (in the first column of Table 8-3) would also need to be maintained over this period. The table is therefore most useful when assessing the long-term price that can be sustained to pay off long- lived water infrastructure (rather than temporary spikes in farm GMs during runs of favourable years). Table 8-3 Price irrigators can afford to pay for water based on the type of farm, the farm water use and the farm annual gross margin (GM), while meeting a target 10% internal rate of return (IRR) Analyses assume water volumes are measured on delivery to the farm gate or surface: pumping costs involved in getting water to the farmland surface would be an additional cost of supplying the water (indicatively $2 per megalitre per metre dynamic head), while pumping costs in distributing and applying the water to the crop are considered part of the variable costs included in the GM. Indicative GMs that the three types of farms could attain in the Southern Gulf catchments are $4000 and $7000 per hectare per year for Broadacre and Horticulture-L farms, respectively (blue- shaded rows), and $11,000 per hectare per year for Horticulture-H. Note that the Horticulture-H farm cannot pay anything for water until it achieves a GM above $17,000 per hectare per year. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au The lowest GM in the first column of Table 8-3 for each farm is the value below which the farm would not be viable even if water was free. This does not necessarily mean that such GMs could readily be achieved in practice: for the capital-intensive Horticulture-H farm in particular, it would be challenging in the Southern Gulf catchments to reach the $17,000 per hectare per year GM to cover the farm’s other costs, even before considering the costs of water. These water prices are likely most useful for public investors in large dams because the sequencing of development creates asymmetric risks between the water supplier and irrigators. Irrespective of the planned water pricing for a dam project, once the dam is built irrigators have the choice whether to develop new enterprises or not, and they are unlikely to act to their own detriment in making that investment if they cannot do so at a water price that will allow them to attain a commercial rate of return. These water prices, together with estimates of likely attainable farm GMs in other parts of the report, provide a useful benchmark for checking assumptions about any potential public dam developments in the Southern Gulf catchments. For on-farm water sources, these water prices can assist in planning water development options that cropping operations could reasonably be expected to afford. Tables in the next sections allow these comparisons by converting capital costs of developing on- and off-farm water sources to volumetric costs (dollar per megalitre supplied). All water prices are based on volumes supplied to the farm gate/surface (after losses getting to that point) per metered megalitre supplied. 8.4 Financial targets required in order to cover costs of large, off- farm dams The first generic assessment considered the case of public investment in a large dam in the Southern Gulf catchments and whether the costs of that development could be covered by water payments from irrigators (priced at their capacity to pay). The public costs of development include the cost of the dam and water distribution, and any other supporting infrastructure required. Costs are standardised per unit of farmland developed, noting that a smaller area could be developed for a crop with a higher water use (so the water development costs per hectare would be higher). 8.4.1 Farm gross margins for off-farm public water infrastructure Table 8-4 shows what farm annual GM would be required for different costs of water infrastructure development at the public investors’ target IRR. As expected, higher farm GMs are required to cover higher capital costs and attain a higher target IRR. These tables can be used to assess whether water development opportunities and farming opportunities in the Southern Gulf catchments are likely to pair together in financially viable ways. Indicative farm GMs that could be achieved in the Southern Gulf catchments are about $4,000, $7,000 and $11,000 per hectare per year for Broadacre, less capital-intensive Horticulture-L (including penalty to GM for outsourcing), and capital-intensive Horticulture-H, respectively (see Section 5.2). In the representative examples given in Table 7-3, a dam and supporting backbone infrastructure in the Southern Gulf catchments would likely require about $80,000/ha of capital investment at the more plausible FSL. None of the three farming types is likely to be viable at these farm GMs and water development costs (at a 3% target IRR for the public investor). Alternatively, Broadacre and lower cost Horticulture-L could both achieve a target 10% IRR for the farm investments while contributing $60,000/ha (75%) towards the cost of a dam (including enabling infrastructure and ongoing O&M costs) that costs $80,000/ha to build. That is considerably higher proportion of costs than irrigators have historically contributed towards irrigation schemes in some other parts of Australia (about a quarter of capital costs (Vanderbyl, 2021)), but would be a decision for the Australian, NT and Queensland governments based on their expectations, priorities and investment criteria. Other of the more cost effective potential dam sites and supporting infrastructure in the Southern Gulf catchments would cost in excess of $100,000/ha. Table 8-4 Farm gross margins (GMs) required in order to cover the costs of off-farm water infrastructure (at the suppliers’ target internal rate of return (IRR)) Assumes 100% farm performance on all farmland in all years once construction is complete. Costs of supplying water to farms are consistently treated as costs of water source development (and not part of the farm GM calculation). Risk adjustment multipliers are provided in Section 8.6. Blue-shaded cells indicate the capital costs that could be afforded by farms with GMs of $4,000 (Broadacre), $7,000 (Horticulture-L) and $11,000 (Horticulture-H) per hectare per year. Blue-shaded column headers indicate the more cost-effective dam development options in the Southern Gulf catchments (Table 7-3). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 8.4.2 Target water pricing for off-farm public water infrastructure Table 8-5 shows the price that a public investor in off-farm water infrastructure would have to charge to fully cover the costs of development of off-farm water infrastructure, expressed per unit of supply capacity at the dam wall. Pricing assumes that the full supply of water (i.e. reservoir yield) would be used and paid for every year over the entire lifetime of the dam, after accounting for water losses between the dam and the farm. It can be challenging for farms to sustain the high levels of revenue over such long periods (100 years) to justify the costs of building expensive dams. For these base analyses, the water supply is assumed to be 100% reliable; risk adjustment multipliers to account for reliability of supply are provided in Section 8.6. Table 8-5 Water pricing required in order to cover costs of off-farm irrigation scheme development (dam, water distribution and supporting infrastructure) at the investors target internal rate of return (IRR) Assumes the conveyance efficiency from dam to farm is 70% and that supply is 100% reliable. Risk adjustment multipliers for water supply reliability are provided in Section 8.6. Pumping costs between the dam and the farm would need to be added (e.g. ~$30/ML extra to lift water ~15 m from weir pool to distribution channels). ‘$ CapEx per ML/y at dam’ is the capital expenditure on developing the dam and supporting off-farm infrastructure per ML per year of the dam’s supply capacity measured at the dam wall. Blue-shaded column headers are indicative of the most cost- effective large dam and supporting infrastructure option available in the Southern Gulf catchments (Table 7-3). For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For example, in the Southern Gulf catchments the most cost-effective dam opportunity would cost about $6000 per megalitre per year of supply capacity at the dam wall after including the required supporting off-farm water infrastructure (see Table 7-3). This would require farms to pay $644 for each megalitre extracted to fully cover the costs of the public investment (at the base 7% target IRR for public investments, Table 8-2). Comparisons against what irrigators can afford to pay (Table 8-3) show that it is unlikely any farming options could cover the costs of a dam in the Southern Gulf catchments at the GMs farms are likely to be able to achieve (see Section 5.2). When a scheme is not viable (BCR <1), the water cost and pricing tables can be used as a quick way of estimating the BCR and the likely proportion of public development costs that farms would be able to cover. For example, a Broadacre farm that uses 8 ML/ha (measured at delivery to the farm) with a GM of $4000 per hectare per year could afford to pay $135/ML extracted (Table 8-3), which would cover 21% ($135/$644) of the $644/ML price (Table 8-5) required to cover the full costs of the public development. The BCR would therefore be 0.21 (the ratio of the full costs of the scheme to the proportion the net farm benefits can cover). As for the example discussed for Table 8-4, it would be a decision for the public investor as to what proportion of the capital costs of infrastructure projects they would realistically expect to recover from users. 8.5 Financial targets required in order to cover costs of on-farm dams and bores The second generic assessments considered the case of on-farm sources of water. Indicative costs for on-farm water sources, including supporting on-farm distribution infrastructure, vary between $5,000 and $20,000/ha of farmland. Costs depend on the type of water source, how favourable the local conditions are for its development, and the irrigation requirement of the farming system. Since the farm and water source would be developed by a single investor, the first analyses considered the combined cost of all farm development together (without separating out the water component). 8.5.1 Target farm gross margins required in order to cover full costs of farm development with water source Table 8-6 shows the farm GMs that would be required to cover different costs of farm development at the investor’s target IRR. Note that private on-farm water sources are typically engineered to a lower standard than public water infrastructure and have lower upfront capital costs, higher recurrent costs (higher O&M and asset replacement rates) and lower reliability. Based on the indicative farm GMs provided earlier (Table 8-2) and 10% target IRR, a Broadacre farm with $4000 per hectare per year GM could cover total on-farm development capital costs of about $20,000/ha. A lower capital cost Horticulture-L farm with GM of $7000 per hectare per year could afford about $40,000/ha of initial capital costs, and a capital-intensive Horticulture-H farm with GM of $11,000 per hectare per year could pay about $30,000/ha for farm development (Table 8-6). This indicates that on-farm water sources may have more prospects of being viable than large public dams in the Southern Gulf catchments, particularly for broadacre farms and horticulture with lower development costs, if good sites can be identified for developing sufficient on-farm water resources at low-enough cost. Table 8-6 Farm gross margins (GMs) required in order to achieve target internal rates of return (IRR) given various capital costs of farm development (including an on-farm water source) Assumes 100% farm performance on all farmland in all years once construction is complete. Risk adjustment multipliers are provided in Section 8.6. Blue-shaded cells indicate the capital costs that could be afforded by farms with GMs of $4,000 (Broadacre), $7,000 (Horticulture-L) and $11,000 (Horticulture-H) per hectare per year. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 8.5.2 Volumetric water cost equivalent for on-farm water source Table 8-7 converts the capital cost of developing an on-farm water source (per megalitre of annual supply capacity) into an equivalent cost for each individual megalitre of water supplied by the water source. The table can be used to estimate how much a farm could spend on developing required water resources by comparing the costs per megalitre against what farms can afford to pay for water (Table 8-3). For example, a Broadacre farm with a GM of $4000 per hectare per year and annual farm water use of 8 ML/ha and a target 10% IRR could afford to pay $135/ML for its water supply (Table 8-3), which would allow capital costs of up to $1000 for each ML/year supply capacity for developing an on-farm supply (Table 8-7). Indicative costs for developing on-farm water sources range from about $500/ML to $2000/ML (based on the range of per hectare costs above) which confirms, by this alternative approach, that there are likely to be viable farming opportunities using on-farm water development in the Southern Gulf catchments. Table 8-7 Equivalent costs of water per ML for on-farm water sources with various capital costs of development, at the internal rate of return (IRR) targeted by the investor Assumes the water supply is 100% reliable. Risk adjustment multipliers for water supply reliability are provided in Section 8.6. Pumping costs to the field surface would be extra (e.g. ~$2 per megalitre per metre dynamic head for bore pumping). Blue-shaded cells indicate $/ML cost of water. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 8.6 Risks associated with variability in farm performance This section assessed the impacts of two types of risks on scheme financial performance: those that reduce farm performance through the early establishment and learning years, and those occurring periodically throughout the life of the development. The effect of these risks is to reduce the expected revenue and expected GM. Setbacks that occur soon after a scheme is established were found to have the largest effect on scheme viability, particularly at higher target IRRs. There is a strong incentive to start any new irrigation development with well-established crops and technologies, and to be thoroughly prepared for the anticipatable agronomic risks of establishing new farmland. Analyses showed that delaying full development for longer periods than the learning time had only a slight negative effect on IRRs, whereas proceeding to full development before learning was complete had a much larger impact. This implies that it is prudent to err on the side of delaying full development (particularly given that, in practice, it is only possible to know when full performance was achieved in retrospect). An added benefit of staging is limiting losses in the cases where small-scale testing proves initial assumptions of benefits to be overoptimistic and that full-scale development could never be profitable, even after trying to overcome unanticipated challenges. For an investment to be viable, farm GMs must be sustained at high levels over long periods. Thus, variability in farm performance poses risks that must be considered and managed. GMs can vary between years because of either short-term initial underperformance or periodic shocks. Initial underperformance is likely to be associated with learning as farming practices are adapted to local conditions, overcoming initial challenges to reach their long-term potential. Further unavoidable periodic risks are associated with water reliability, climate variability, flooding, outbreaks of pests and diseases, periodic technical or equipment failures, and fluctuations in commodity prices and market access. Periodic risks, such as unreliability of water supply, are less easy to avoid. Results for analyses of both periodic and learning risks are shown below. We acknowledge that right to farm and other sovereignty risks, especially with regard to access to water, may become key factors in future years, based on experience from elsewhere. These however are not the subject of the risk discussion here. Throughout this section, farm performance in a given year is quantified as the proportion of the long-term mean GM a farm attains, where 100% performance is when this level is reached and 0% equates to a performance where revenues only balance variable costs (GM = zero). 8.6.1 Risks from periodic underperformance Analyses considered periodic risks generically without assuming any of the particular causes listed above. To quantify their effects on scheme financial performance, periodic risks were characterised by three components: 1. Reliability – the proportion of ‘good’ years where the ‘full’ 100% farm performance was achieved, with the remainder of years being ‘failures’ where some negative impact was experienced 2. Severity – the farm performance in a ‘failed’ year where some type of setback occurred 3. Timing – for ‘early’ timing a 10-year cycle was used (e.g. 80% reliability meant that failures would occur in the first 2 years of the scheme and the first 2 years of each 10 years in a cycle after that). For ‘late’ timing, the ‘failures’ came at the end of each 10-year cycle. Where ‘random’ timing was used, each year was represented as having the long-term mean farm performance of ‘good’ and ‘failed’ years (frequency weighted). Table 8-8 summarises the effects of a range of different reliabilities and severities for periodic risks on scheme viability. Periodic risks had a consistent proportional effect on target GMs, irrespective of development options or costs, so results were simplified as a set of risk adjustment multipliers. The multipliers can therefore be applied to the target farm GMs in the previous section (required to cover capital costs of development at investors’ target IRRs at 100% farm performance) to account for the effects of various risks. These same adjustment factors can be applied to the water prices that irrigators can afford to pay (Table 8-3) but would be used as divisors to reduce the price that irrigators could pay for water. As expected, the greater the frequency and severity of ‘failed’ years, the greater the impact on scheme viability and the greater the increase in farm GMs required to offset these impacts. As an example, the reliability of water supply is one of the more important sources of unavoidable variability in productivity of irrigated farms. Water reliability (proportion of ‘good’ years, where the full supply of water is available) is shown as ‘reliability’ in Table 8-8, and the mean percentage of water available in a ‘failed’ year (where less than the full supply is available) is shown as the ‘failed year performance’ in Table 8-8 (assuming the area of farmland planted is reduced in proportion to the amount of water available). For example, if a water supply was 85% reliable and provided on average 75% of its full supply in ‘failed’ years, a risk adjustment factor of 1.04 (Table 8-8) would have to be applied to baseline target GMs (Table 8-4 and Table 8-6) and the prices irrigators can afford to pay for water (Table 8-3). This means that a 4% higher GM would be required to achieve a target IRR (and irrigators’ capacity to pay for water would be ~4% lower) than if water could be supplied at 100% reliability. For crops where the quality of produce is more important than the quantity, such as annual horticulture, the approach of reducing planted land area in proportion to available water in ‘failed’ years would be reasonable. However, for perennial horticulture or tree crops it may be difficult to reduce (or increase) areas on an annual basis. Farmers of these crops would therefore tend to opt for systems with a high degree of reliability of water supply (e.g. 95%). For many broadacre crops, deficit irrigation could partially mitigate impacts on farm performance in years with reduced water availability, as could carry-over effects from inputs (such as fertiliser) in a failed year that reduce input costs the following year. Table 8-8 Risk adjustment factors for target farm gross margins (GMs), accounting for the effects of reliability and severity (level of farm performance in ‘failed’ years) of periodic risk of water reliability Results are not affected by discount rates. ‘Good’ years = 100% farm performance; ‘failed’ = <100% performance. ‘Failed year performance’ is the mean farm GM for years in which some type of setback is experienced relative to the mean GM when the farm is running at ‘full’ performance. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 8-9 summarises how timing of periodic impacts affects scheme viability, providing risk adjustment factors for a range of reliabilities for an impact that had 50% severity with late timing, early timing and random (long-term frequency, weighted mean performance) timing. These results show that any negative disturbances that reduce farm performance will have a larger effect if they occur soon after the scheme is established, and that this effect is greater at higher target IRRs. For example, at a 7% target IRR and 70% reliability with ‘late’ timing (where setbacks occur in the in the last 3 of every 10 years), the GM multiplier is 1.13, meaning the annual farm GM would need to be 13% higher than if farm performance were 100% reliable. In contrast, for the same settings with ‘early’ timing, the GM multiplier is 1.23, the farm GM would have to be 23% higher than if farm performance were 100% reliable. The impacts of early setbacks are more severe than the impacts of late setbacks. Table 8-9 Risk adjustment factors for target farm gross margins (GMs) accounting for the effects of reliability and the timing of periodic risks Assumes 50% farm performance during ‘failed’ years, in which 50% farm performance means 50% of the GM at ‘full’ potential production. IRR = internal rate of return. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 8.6.2 Risks from initial ‘learning’ period Another form of risk arises from the initial challenges in establishing new agricultural industries in the Southern Gulf catchments; it includes setbacks from delays, such as gaining regulatory approvals and adapting farming practices to Southern Gulf catchments conditions. Some of these risks are avoidable if investors and farmers learn from past experiences of development in northern Australia (e.g. Ash et al., 2014), avoid previous mistakes and select farming options that are already well-proven in analogous northern Australian locations. However, even well-prepared developers are likely to face initial challenges in adapting to the unique circumstances of a new location. Newly developed farmland can take some time to reach its productive potential as soil nutrient pools are established, soil limitations are ameliorated, suckers and weeds are controlled, and pest and weed management systems are established. ‘Learning’ (used here to broadly represent all aspects of overcoming initial sources of farm underperformance) was assessed in terms of two simplified generic characteristics: 1. initial level of performance –the proportion of the long-term mean GM that the farm achieves in its first year 2. time to learn – the number of years taken to reach the long-term mean farm performance. Performance was represented as increasing linearly over the learning period from the starting level to the long-term mean performance level (100%). The effect of learning on scheme financial viability was considered for a range of initial levels of farm performance and learning times. As described above, learning had consistent proportional effects on target GMs, so results were simplified as a set of risk adjustment factors (Table 8-10). As expected, the impacts on scheme viability are greater the lower the starting level of farm performance and the longer it takes to reach the long-term performance level. Since these impacts, by their nature, are weighted to the early years of a new development, they have more impact at higher target IRRs. To minimise risks of learning impacts, there is a strong incentive to start any new irrigation development with well-established crops and technologies, and to be thoroughly prepared for the anticipatable agronomic risks of establishing new farmland. Higher- risk options (e.g. novel crops, equipment or practices that are not currently in profitable commercial use in analogous environments) could be tested and refined on a small scale until locally proven. As indicated in the examples above, the influence of each risk individually can be quite modest. However, the combined influence of all foreseeable risks must be accounted for in planning, and the cumulative effect of these risks can be substantial. For example, the last question in Table 8-1 shows the combined effect of just two risks requires farm GMs to be about 50% higher than they would be without the risks. See Stokes and Jarvis (2021) for the effects of a common suite of risks on the financial performance of a Bradfield-style irrigation scheme. Table 8-10 Risk adjustment factors for target farm gross margins (GMs), accounting for the effects of learning risks Learning risks were expressed as the level of initial farm underperformance and the time taken to reach full performance levels. Initial farm performance is the initial GM as a percentage of the GM at ‘full’ performance. IRR = internal rate of return. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au 8.7 Achieving financial viability in a new irrigation development Four key factors determine the financial performance and viability of irrigation schemes: capital costs of development, farm performance (that determines trajectories of future water demand and associated benefits from increased gross value of agricultural production (GVAP)), risk (and associated required level of investment return), and value adding beyond the farm gate (Stokes et al., 2017, 2023; Webster et al., 2024). Designing a new irrigation project would require balancing these four factors to find combinations that might collectively constitute a viable investment. As demonstrated by lessons from recent dam developments in Australia (Chapter 6), it can be difficult to fully balance the costs of new water infrastructure with the direct new benefits they generate. In concluding this chapter, the broad principles for balancing each of the factors analysed is discussed below. Lowest capital costs of development – cheapest water As highlighted in the companion reports in this Assessment, developing water resources suitable for irrigation in northern Australia is technologically challenging and opportunities are limited. The costs of developing these resources vary widely (Devlin, 2024), such that even when technically feasible options are found, many of these are likely to be too expensive for irrigation schemes. Capital costs of developing new water sources are high and a key determinant of scheme financial viability. Results suggest broadacre farms with GMs of $4000 per hectare per year would generate sufficient revenue (while providing a 10% IRR to farmers) to cover the costs of about $20,000 to $30,000/ha of off-farm water infrastructure, before accounting for the negative effects of risks. This would cover about 50% of the costs of the most cost-effective large dam development option in the Southern Gulf catchments (about $50,000/ha off-farm water infrastructure cost; at a 7% target IRR for the public investor). Although irrigators are therefore unlikely to be able to pay the full costs of a publicly developed large dam, they may be able to cover a greater proportion of costs (>25%) than in many existing irrigation developments (Vanderbyl, 2021). On-farm water sources appear to provide good opportunities for affordable water that could support broadacre and cost-efficient horticulture but developing these resources would need to concentrate on the most cost-effective sites. Highest farm gross margins – best crops, soils and niche opportunities The companion report on land suitability (Thomas et al., 2024) highlights where the best soils for various farming options are likely to be found (summarised in Section 3.2), and Chapter 5 assessed a range of farming options, including opportunities and constraints on maximising farm performance (including farm GMs). There are likely to be niche opportunities for farmers to improve GMs by taking advantage of cost savings and price premiums, but these are unlikely to be scalable. Periods of high prices for agricultural commodities (such as the recent high prices for cotton) provide opportunities for new industries to establish by creating a buffer for learning during the crucial start-up years when farms and associated supply chains will not yet be performing at their full sustainable potential. Reducing investor risk – making lower investor returns acceptable There are numerous risks that confront large infrastructure projects, such as new irrigation schemes. The higher these risks, the higher the return an investor would likely require, raising the performance thresholds a project would have to attain to be commercially viable. Conversely, lowering those risks lowers the target revenues that scheme investors would need to generate, which could contribute to making a potential investment viable. One of those risks is the paucity of background information required to develop new irrigation schemes in northern Australia. The information provided in the companion technical reports in this Assessment is targeted at addressing this information gap and reducing the uncertainty about the physical resources in the Southern Gulf catchments, and how they might be developed. Some risks can be avoided through careful planning, learning from past cropping experiences in northern Australia, and starting with well-established crops, technologies and management practices. Risks that cannot be avoided must be managed, mitigated where possible and accounted for in determining the realistic returns that can be expected from a scheme. This would include having adequate capital buffers to survive through challenging periods that may exacerbate negative cashflows in the initial years of establishment. Another perceived risk for investors is that of uncertainty around future policy, regulation changes, and tenure rights for land and water. Reducing this, or any other sources of risk, would help make marginal investment opportunities more attractive. Value adding and synergies Value adding and synergies could contribute to the viability of a new irrigation scheme. The establishment of a new cotton gin in north Queensland provides opportunities for processing and provides natural synergies for the local use of cotton seed as a cattle feed supplement within north-west Queensland. Other synergies that could also be considered to improve scheme revenues or reduce costs would include: (i) sequential cropping systems (increasing net farm revenue by growing two or more compatible crops from the same field each year; Section 5.3); (ii) integration of irrigated forages into existing beef enterprises (Section 5.4); (iii) including small- scale, high-value crops in the mix of farms in a scheme; (iv) expanding the scale of a scheme with extra rainfed/opportunistic cropping around the irrigated core; and (v) improving transport infrastructure and supply chains (reducing the disadvantages of remote locations). Location- appropriate production systems would need to be developed and proven for some of these options. Conclusion Ultimately no single one of the above factors is likely to provide a silver bullet to meet the substantial challenge of designing a commercially viable new irrigation scheme. Achieving financial viability will likely require contributions from each of the above factors, with careful selection to piece together a workable combination. 9 Regional economics 9.1 Multiplier and input–output (I–O) approach When new economic activity begins in a region, such as with the development of a water infrastructure project, there will be knock-on effects to the wider regional economy, over and above the impacts directly related to the development scheme itself, through the way the new activities affect the flows of local goods and services. These effects can be both positive and negative. This section uses regional multiplier and input–output (I–O) analysis to estimate the regional economic benefits that could arise if new irrigated development were to occur in the catchment of the Southern Gulf rivers. When evaluating the regional economic impact of new irrigated agricultural development within the Southern Gulf catchments, there are two separate analyses required for each of the two distinct phases of the scheme. Firstly, the initial temporary impact from the construction activity at the start of the project. This is followed by the ongoing impacts arising from the increased agricultural production within the region once the development becomes operational and the new farming operations are up and running. The approach closely follows the regional economic analyses used in previous similar water resource assessments for northern Australia (Stokes et al., 2017), Roper catchment (Stokes et al., 2023), Darwin region (Stokes and Jarvis, 2021) and Victoria catchment (Webster et al., 2024), with further details of the approach, including discussion of the relative strengths and weakness of I–O analyses, covered in those reports. To briefly summarise, I–O multipliers are widely used to quantify economic impacts of projects (at regional or national level), offering clear advantages of transparency and ease of use compared to other methods. Simplistically, the method enables an estimate to be made of the total regional or national impact of the development project including the direct spend of the project itself, plus all the production and consumption-induced (knock-on) impacts on other businesses and households within the region. The I–O multiplier approach recognises that the full impact of the economic stimulus provided by an irrigated agricultural development project extends far beyond the impact on those businesses and workers directly involved in either the short term (the construction phase) or longer term (the ongoing agricultural production phase). Those businesses directly benefitting from the increased construction (short term) and agricultural activity (longer term) would need to increase their purchases of goods and services, which would stimulate economic growth in the regions where those products were purchased. These impacts are known as production-induced effects. Furthermore, household incomes increase when local residents are employed as a consequence of the direct and/or production-induced business stimuli. A proportion of this additional income is spent within the region, creating additional demand, which serves to further stimulate regional economic activity. This additional economic activity is known as a consumption-induced effect. The size of the production-induced and consumption-induced benefits can be quantified by the economic multiplier. Regional (or national) I–O multipliers are summary measures used to estimate the total economic impact on all industries within a region (or nation), from a change in demand for the output of any particular industry (McLennan, 1996). The key output from the I–O models is the estimated value of the increased economic activity (including, when focusing on an irrigated agricultural development, the original increase to construction or agriculture), where larger multipliers generate larger regional benefits. The models also estimate the increase in household incomes in the region and then estimate the approximate number of jobs represented by this increased economic activity, including those directly related to the increase in construction or agriculture and those generated by the indirect production and consumption effects. Thus, I–O models can be used to estimate the impact of new irrigation development on employment, income and regional economic activity during each phase (development and operational), encompassing all of the direct and indirect impacts expected as a result of the development. I–O tables and associated multipliers can be constructed at a national or regional scale. With national models, inputs and outputs by industry sector reflect national production and spending patterns, while additional data reflect international imports and exports. For Australia, the Australian Bureau of Statistics (ABS) releases national I–O tables at regular intervals, with the latest release being for the financial year 2020–21 (ABS, 2023b). However, despite publishing the national I–O tables, the ABS has not compiled and published national I–O multipliers based on these tables since 1998–99 (leaving such a step to data users who can use the published national I–O tables to calculate multipliers at national level) due to concerns that provided multipliers could be used for purposes where they are unsuitable, or where lack of consideration is given to their inherent shortcomings and limitations; these limitations are discussed further below (Section 9.1.2). The ABS does not prepare or publish I–O tables at sub-national scale. Regional models focus on a specific region and thus contain a spatially delimited subset of the expenditure patterns used in national models. They also require additional data to identify inter- regional imports and exports and to quantify other regional-specific spending patterns (Jarvis et al., 2018). This is necessary as relationships between industries within a region are not identical to those at the national scale. Typically, smaller and more remote geographic areas have smaller multipliers as inter-industry linkages tend to be shallow and the region’s capacity to produce a wide range of goods is low, meaning that inputs and final household consumption are less likely to be locally sourced than in regions with larger urban centres (Jarvis et al., 2018; Stoeckl and Stanley, 2009). Furthermore, firms in rural and remote areas may have disparate access to production technologies, are often less able to take advantage of economies of scale, and face different relative input prices than their counterparts in developed urban areas (Stoeckl, 2012). In addition to differences in economic scales between regions, different industries are also more or less prominent in different regions; these differences can have an impact on the relative size of multipliers comparing region to region and industry to industry (Jarvis et al., 2018). Accordingly, where available, regional-specific models should be selected for use in the analysis. The regional context is vital, particularly in rural remote areas that likely have different characteristics compared with the rest of the country. Unfortunately, regional I–O tables are rare, and infrequently prepared; the lack of a recent and regionally specific model is accepted as a limitation of this work. When considering the regional economic impact of such a development it is important to be aware that not all expenditure generated by the scheme will occur within the local region. The greater the leakage (that is the amount of direct and indirect spend made outside the region), the smaller the resulting economic benefit enjoyed by the region. Conversely, the greater the retention of the initial spend, and subsequent indirect spend within the region, the greater the economic benefit, and the number of jobs created, within the local region. Accordingly, where there is leakage to other regions the local knock-on benefits would be reduced, but there would be benefits in the other regions where the expenditure occurred instead; thus, the irrigated agricultural development would provide benefits to those other regions across Australia who were the recipients of the additional demand for goods and services stimulated by the irrigated agricultural development. However, in instances where the leakage is to other countries, such as when capital items are imported, the benefits would flow outside of Australia. Thus, the economic impact of the project that remains within the local region, or within the country, is dependent on the skills and resources available locally and nationally, and leakage issues can be mitigated by careful design of the project, in both the construction and operational phases. Leakage from the local region can be minimised if local resources, including local workers and local businesses, can be employed; leakage from the region to elsewhere in the nation represents lost benefit locally but is offset by benefit gains elsewhere which may be viewed as ‘no net loss’ overall if the project is funded at the national level. However, leakage from the local region to international suppliers is a true loss, which may be minimised by careful project design but may be unavoidable if particular resources and skills can only be sourced overseas. Another important consideration for model selection, beyond the specific geographic location, was the demographic characteristics of the region. The Southern Gulf catchments population includes a much larger proportion of people identifying as Indigenous compared to Australia as a whole, and this characteristic can have a significant effect of any development in the region. Research based on small, remote communities has found that the expenditure patterns of Indigenous communities differ from the typical patterns elsewhere in Australia (Stoeckl et al., 2013). Additionally, Indigenous Australians are less likely to be in formal employment (government-sponsored employment schemes often involve a transfer of public funds from outside the region) and are proportionally more likely to be employed in the public and health sectors than non-Indigenous residents (Stoeckl et al., 2011). Accordingly, the greater proportion of Indigenous Peoples within the region compared to the national average further underpins the necessity of using I–O tables derived from local data, or from data as close to local as possible, rather than basing analyses on models drawn from dissimilar regions. A further important consideration for the selection of a suitable model was the unusual nature of the Southern Gulf catchments economy, comprising two distinct components: firstly, the mining dominated city of Mount Isa, which comprises a small portion of the land mass of the region but the vast majority of the population, and secondly, the large and scarcely populated agricultural region surrounding the city. As noted above, recent regional I–O models are rare, and unfortunately no model exists that is specific to the Southern Gulf catchments. Hence, there was a need to source model(s) that could provide an approximation of the likely impact of this development for this region. The analyses use an I–O model for the north-west region of Queensland that fairly closely reflects the unusual nature of the region (mining city surrounded by rural, remote lands and with a significant proportion of the population identifying as Indigenous). This model is used to provide insights into the likely economic impact of this development. Details of this model, and the appropriateness of this for providing insights into the likely regional economic impacts from a development within the Southern Gulf catchments, is discussed in more detail in the following section (Section 9.1.1). This report focuses on the total output multipliers (referred to as Type II multipliers). Type II multipliers consider initial (direct) expenditure and intra-industrial ‘knock-on’ benefits along the business supply chain (as measured by simple output Type I multipliers) as well as ‘knock-on’ effects linked to the local expenditure of (household) wages and income (McLennan, 1996; Gretton, 2013). 9.1.1 Description of the regional model used for I–O analysis For the analysis presented here, regional multipliers were derived and modified from a publicly available source, being a regional I–O table developed by the Office of the Government Statistician of the Queensland Government providing coverage for the north-west region of Queensland (Office of the Government Statistician, Queensland Government, 2004). Figure 9-1 shows the relative geographic locations of this I–O region and the Southern Gulf catchments and Table 9-1 summarises the socio-economic characteristics for comparison. Extent of regional input models map \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\1_GIS\1_Map_docs\Se-S-506_Map_Australia_and_economic_regions_v1.mxd For more information on this figure please contact CSIRO on enquiries@csiro.au Figure 9-1 Regions used in the (I–O) analyses relative to the Southern Gulf Water Resource Assessment area The I–O model covers a much wider geographic scale than the Southern Gulf catchments (307,082 km2 for north-west Queensland compared to 108,097 km2 for the Southern Gulf catchments). However, the regionally important city of Mount Isa falls within both regions. Both geographic scale and degree of urbanisation can have an impact on the relative complexity of the economic structures in each region. Agriculture provides less employment to the Southern Gulf catchments than to the larger north-west Queensland region, providing 3% and 9%, respectively, of employment within each region. Due to the larger scale (on measures of geography, population and level of agricultural economic activity), the multipliers estimated using the north-west Queensland model will likely be larger than the multipliers for a smaller sub-region of the state. This is because of a number of factors, including fewer opportunities to take advantage of economies of scale, increased input prices and reduced access to production technologies, as described above (Stoeckl, 2012). Accordingly, the estimated multipliers are likely to provide upper bounds estimates of the multipliers for the Southern Gulf catchments region itself. However, given the catchments are almost entirely nested within the I–O model region, these models are likely to be a more appropriate estimate of the magnitude of the impact of a water development on the economic activity within the wider region, including the catchments and surrounds. Table 9-1 Key 2021 data comparing the Southern Gulf catchments with the related input–output (I–O) analysis regions Population statistics for the Southern Gulf catchments has been estimated based on the weighted average of 2021 Census data (ABS, 2021a) obtained by SA2 statistical region, with weighting based on the proportion of relevant ABS SA2 statistical regions falling within each of the catchments’ regions. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au † Statistics for the Southern Gulf catchments (ABS, 2021a) have been estimated using the weighted mean of ABS 2021 Census data obtained by SA2 statistical region, with weighting based on the proportion of relevant ABS SA2 statistical regions falling within the region of the catchments. ‡ ABS 2021 Census data (ABS, 2021a). § ABS Value of agricultural commodities produced 2020–21 by region, report VACPDCASGS202021 (ABS, 2022a). The north-west Queensland I–O table is one of a number of regional I-O tables developed by the Queensland Government for ten different regions across the state (Office of the Government Statistician Queensland Government, 2004). This I–O table utilises data from 1996–97 and incorporates inputs and outputs relating to 34 industry sectors operating within the region. See Office of the Government Statistician Queensland Government (2004) for additional detail on the methods and data used to prepare this table. While more recently compiled I–O table data would have been desirable, in general industry relationships within regions change slowly and the multipliers generally remain fairly stable over time (McLennan, 1996). The analyses presented here aggregated the 34 industries in the model to a smaller subset of 22 industry classes, both to reflect the nature of economic activity in the Southern Gulf catchments and for consistency with similar previous analyses done for northern Australian catchments that used the same industry aggregations (Stokes et al., 2017, 2023; Stokes and Jarvis, 2018; Webster et al., 2024). The agricultural sectors included in this aggregated model were ‘beef cattle’; ‘agriculture excluding beef cattle’; and ‘aquaculture, forestry and fishing’. For this study the north-west Queensland I–O model was further amended to disaggregate the impacts on household incomes and job creation between Indigenous and non-Indigenous households, using disaggregation methods established by Jarvis et al. (2018). Using this adapted I-O model, the total regional benefits from the operations of an irrigation development including all multiplier effects (indirect production effects, and the consumption effects linked to the local expenditure of (household) wages and income, in addition to initial direct effects) is estimated using I–O analysis. The regional economic impact from the construction phase and from the ongoing agricultural production phase of the development are estimated separately. The I–O analysis incorporates the value of the anticipated additional agricultural output directly driven by new development as an exogenous shock to the appropriate industry, then estimates how much additional activity is generated within each I–O region as a result of the exogenous shock. The I–O analysis also estimates the likely increases to household incomes in the region. This increase in income was used to estimate the increase in jobs created in the I–O region (directly, and indirectly through production and consumption effects), by dividing the total increase in household incomes by the average income in the I–O region. Specifically, the estimated number of jobs was calculated as follows: Estimated additional jobs = Total estimated increase in household incomesEstimated mean employee income in Queensland (1) Where ‘Estimated mean employee income in Queensland’ has been calculated based on latest available mean employee income data for Queensland (as at December 2023) from the ABS (ABS, 2023d) updated using wage price indices to more current wage rates based on the ABS wage price index data series (ABS, 2023c). Specifically, the estimated mean employee income in Queensland was calculated to be $69,359 based on the following calculation: Estimated mean employee income=Employee income Jun ’20× Wage index Sept ’23Wage index Jun ’20 (2) Because the purpose of the analysis was to estimate the number of new jobs created, incomes were specifically estimated only for employees (because including income from pensions or other non-employment sources would distort job estimates). It should be noted that this method results in an imperfect estimate of the number of jobs created and is affected both by the limitations of I–O analysis and by the assumption that the mean income from additional direct and indirect jobs created will be the same as the current mean income level in Queensland. However, it provides some guidance to the likely employment opportunities that could result from development within the region. As with all estimates resulting from I–O analysis, this should be considered as an upper-bound estimate. 9.1.2 Strengths, limitations and inherent weaknesses of using I–O multipliers to assess regional economic impacts When using I–O analysis and I–O-derived multipliers for analysis of regional economic impact of developments, such as an irrigated agriculture development within the Southern Gulf catchments, it is important to be aware of the inherent weaknesses and limitations of the approach, in addition to the factors that make the approach appropriate for use in such a location. Firstly, the approach fails to recognise or incorporate any supply-side constraints or budget constraints, the omission of which results in estimates overstating the likely economic impacts, particularly when capital and/or labour are scarce (Gregg and Hill, 2023; Gretton, 2013). Secondly, the approach assumes the structure of the regional economy, including interlinkages between different sectors of the economy and ratios of leakages from the region, does not change either over time or as a result of policy or technological advancements. That is, the approach assumes fixed prices, fixed ratios for intermediate inputs and production, and makes no allowance for purchasers’ marginal responses to change. Relatedly, the analysis does not reflect any removal or substitution effects if expanding one sector (for example beef cattle) results in the reallocation of resources across sectors. Again, such omissions are likely to result in biased estimates of economic impacts. More detailed discussion of the limitations of I–O multiplier analysis can be found in the Roper River Water Resource Assessment technical report on agricultural viability and socio- economics (Stokes et al., 2023) and ABS (2023e). These inherent limitations should be borne in mind when considering the results set out below. Specifically, the limitations and weaknesses inherent in the assumptions underpinning the approach results in multipliers providing biased estimates of the benefits or costs of a project. However, despite these acknowledged limitations, there are aspects of the I–O multiplier approach that make it well-suited for scoping assessments of the potential regional benefits of greenfield developments in remote parts of Australia, which is how multipliers are used here. Firstly, alternate approaches to estimating regional economic impacts, such as computable general equilibrium (CGE) models, are also imperfect and frequently suffer from similar limitations. Furthermore, models using alternate approaches are generally unavailable for small rural and remote regions such as the Southern Gulf catchments, and CGE modelling has proven unsuitable, or to offer little benefit compared to I–O models, in previous similar applications for estimating the regional impacts of small agricultural developments that represent such a minor perturbation to regional economies. To provide two examples: • The use of The Enormous Regional Model (TERM) dynamic multi-regional CGE model was trialled for assessing the impact of water resource developments within the catchments of the Flinders and Gilbert rivers (Brennan McKellar et al., 2013). This model has been described in great detail (see Wittwer, 2012), and when developed was theoretically an improvement on prior models due to providing finer regional divisions and disaggregating the economy across a wider number of industrial sectors, and indeed, appears to have been successfully used in a number of examples such as within the southern Murray–Darling Basin (Wittwer, 2012). However, in practice, for small remote data-poor regions such as the Southern Gulf catchments, the model suffers limitations similar to the simpler (and less costly) I–O approach. For example, the model was developed based on historical data (a national I–O table supplemented with some regional data, with a base year of 1997) and, despite the model disaggregating Australia into 57 different regions, these regions are insufficiently fine scale to match northern river catchments (the NT as a whole, for example, forms one region in the model) (Horridge, 2012). • The use of the Australian Bureau of Agricultural and Resource Economics and Science (ABARES) AusRegion dynamic regional CGE has been trialled for assessing the regional economic impact of water resource developments across a number of different water resource developments (Ash et al., 2014), seeking to demonstrate the impact of development compared to a reference scenario, on output, employment and wages at the regional level, and on output at state and national levels. This approach offered the advantage of providing bottom-up estimates of impact at different scales (regional, state, national), but suffered limitations similar to the I–O approach, in that the model was based on historical data (2005–06) regarding the structure of the economy and interrelationships between industries and regions, and also that the model failed to disaggregate regional data to the fine scale required to match northern river catchments. Further, the usefulness of the approach was limited by the model outputs, which represented, for one future time period only (2029–30), the percentage difference between the economic indicators for that year under the development scenario compared to the reference scenario. These results appeared to emerge from the complex model as if from a ‘black box’ approach, with no quantification, or indication of relative importance, of the different drivers underpinning the cumulative effect of construction and operational phases over time, or of the changing impacts over time; thus the results provide little to no guidance on how these component regional economic impacts could change in response to variations in the assumptions underpinning the scenario (Ash et al., 2014). Thus, taking into account the practical considerations of working with a small, remote region, I–O analysis is the most suitable approach for assessing regional economic impacts in the Southern Gulf catchments (and similar river catchments in northern Australia). Secondly, a region such as the Southern Gulf catchments provides a data-sparse environment with few local precedents or alternate developments that can act as proxies to guide the likely outcomes from irrigated agricultural developments within the region. Alternate approaches to I– O, such as the CGE models, are data intensive, requiring detailed information on the structure of the economic system in the region under study to enable the regional economic model to be specified and parameterised. This includes structural information on production, consumption and trade, for example, and additionally, further data on behaviours, describing how this system will respond to changes; this usually requires information in the form of elasticities of demand, production and trade. The problems of gathering reliable data for remote regional areas are well known. Beyond the physical challenges of collecting data from remote, hard-to-access regions (due to poor transport and communication infrastructure, difficult terrain and extreme/variable weather conditions), the reporting of socio-economic data is also frequently suppressed or distorted for confidentiality purposes.8 These data problems are exacerbated for regions with smaller and highly Indigenous populations. Taylor (2013) describes some of the flaws in data relating to Indigenous Peoples and their communities, which raise questions of data accuracy and also comparability of data over time. Some of the reasons noted as underpinning data issues 8 An explanation from the ABS can be found at ABS website . include a changing propensity of individuals to identify as Indigenous over time and more frequent mobility of Indigenous Peoples (Taylor, 2013); these problems are exacerbated by the acknowledged significant undercounting of Indigenous Peoples in official statistics such as Census data, thought to be 17.4% for the 2021 Census (ABS, 2022b), similar to 17.5% for the 2016 Census (ABS, 2018). In such scenarios, the less data hungry I–O approach can be reasonably robust, compared to theoretically preferred but more data hungry approaches such as CGE, thus making the approach attractive in such a region as the Southern Gulf catchments (data-sparse, remote and with a large proportion of the population identifying as Indigenous). Finally, I–O approaches can usefully provide an estimate of the upper bound of regional knock-on effects at relatively low cost. By indicating the likely upper bound of these added benefits, they enable the easy identification of schemes that are likely to produce benefits too small to be able to justify substantial public subsidies for schemes that are not close to being financially viable in the first place. For such schemes, a more precise measure of regional benefits would be unlikely to change substantive decisions about whether a scheme would go ahead or not (e.g. even if the knock-on benefit was 50% lower or 50% higher this would not be enough to tilt a decision on a financially non-viable scheme becoming viable or vice versa). For situations where CBA indicated that a scheme was very close to being viable and regional benefits were to be a critical deciding factor, then it would be appropriate to go beyond indicative I–O analysis and invest in additional bespoke regional economic analysis in those specific cases. This is in line with the activities in the other parts of this Assessment which, as a combined scoping study, is primarily aimed at assisting investors and government planners in identifying where potential opportunities lie (distinguishing development options that might be viable from those that can easily be ruled out), with the expectation that specific project proposals would need to conduct additional feasibility analysis. In summary, the lack of better alternate approaches for many rural and remote Australian regions, combined with their adaptability and ease of use, makes I–O multipliers a popular and suitable tool for scoping-level economic impact analysis. When used appropriately, I–O multipliers can provide valid and useful information, provided results are carefully interpreted with due consideration for the key assumptions and limitations that underpin the models (Gregg and Hill, 2023; Gretton, 2013; Office of the Government Statistician Queensland Government, 2004). Accordingly, when using the results presented in the section below (Section 9.2) it is important to recognise the effect of the limitations is that regional benefit values are likely to represent an upper-bound estimate of potential outcomes (ABS, 2019). This becomes a more significant issue with larger and more complex developments, as smaller and fairly simple developments are less likely to distort current markets, place price pressures on supply chains and labour markets, and require imports (materials, equipment, skilled labour) from overseas. 9.2 Regional economic benefits I–O analysis was applied to two distinctly separate streams of benefits: the ‘one-off’ benefits that arise during the construction phase of a new irrigation scheme and the ongoing benefits that arise during the operational phase when new farming production begins. Accordingly, the multipliers and estimated regional impacts of the two distinct phases are considered separately below. Estimates of regional benefits included all Type II multiplier effects (indirect production-induced effects, and the consumption-induced effects linked to the local expenditure of household wages and income, in addition to initial direct effects). The analysis is not based on any specific construction project and subsequent irrigated agricultural operations. Rather, the analysis provides information illustrating potential regional outcomes from a range of alternate types/scales of construction projects and the agricultural operations that could flow from these. The initial source of funding for the capital cost of the water infrastructure development is not addressed in this analysis, that is, the analysis does not explicitly address the upfront source of the capital funding (be it private sector, public sector or public–private partnership). Similarly, the analysis during the operational phase doesn’t explicitly address the size/proportion of contribution to construction cost required from farmers compared to possible public subsidies provided. However, the implications of funders and funding mechanisms are discussed in each of the sections below. 9.2.1 Regional economic benefits arising during construction phase (one-off) While there is an initial cost of building irrigation infrastructure (and other related infrastructure such as new roads), by creating additional expenditure within a region (thus putting additional cash into people’s/firm’s pockets) this increases regional economic activity. Thus, this creates a fairly short-term (non-recurring) economic benefit to the region during the construction phase. Construction industry multipliers should be applied to the annual expenditure on construction over the duration of the construction phase of the project, that is, they estimate the impact on the regional economy of the construction activity for the year in which that construction activity takes place. This regional economic impact will be of a ‘one-off’ nature; that is, the benefit will not be repeated in subsequent years. The regional impacts of the construction phase of potential developments were estimated using a scenario approach for the scales of development. The analyses modelled regional impacts for five different indicative sizes of developments in the Southern Gulf catchments. Total capital costs, including costs of labour and materials required by the project, ranged from $250 million to $4 billion. The smallest scale of development in Table 9-2, with a capital cost of $250 million, broadly represents about 20 new farm developments with their own on-farm water sources enabling around 10,000 ha of irrigation for horticulture and broadacre farming (based on the costing information previously presented for on-farm establishment costs in Table 7-1 and for on- farm water source developments in Table 7-2). The second-smallest scenario, with a $500 million capital cost, could represent a similar development to the first but with 20,000 ha of new irrigated farmland; this level of investment could also include a new processing facility (such as a cotton gin) that could be required and supported from this scale of agricultural development. Alternatively, the $500 million development could represent a large off-farm water infrastructure development (based on indicative costings for the most cost-effective dam locations in the Southern Gulf catchments, Table 7-3) along with related farm establishment costs (Table 7-1). The larger scales of development, at $1, $2 and $4 billion shown in Table 9-2, indicate outcomes from combining potential developments in different ways (such as one large off-farm dam and multiple on-farm water sources). They also include investment in indirect supporting infrastructure across the region, such as roads, electricity and community infrastructure (as described in sections 7.5, 7.6 and 7.7). Careful consideration was given to estimating the appropriate proportions of initial spend during the construction phase that would actually be spent within the region. The costs incurred during this phase would include labour, materials and equipment costs. It is likely that wages would be paid to workers sourced both from within the region and from elsewhere. The likely proportion of labour costs for each source of workers depends on the availability of appropriately skilled labour within the region. For example, a highly populated region with a high unemployment rate is likely to be able to supply a large proportion of the workers required from within the region; however, a sparsely populated region like the Southern Gulf catchments (outside Mount Isa) with fewer trained construction workers would likely need to attract many workers from outside the region, on a fly-in fly-out (FIFO) and/or drive-in drive-out (DIDO) basis. Similarly, some regions may be better able to supply a large proportion of the materials and equipment from within the region whereas construction projects in other locations may not be able to source what they need locally and instead import a significant proportion into the region from elsewhere. A scenario approach was again adopted, indicating the impact that would result from three different proportions of local construction spend (labour, equipment and materials) that could be sourced within the region (as opposed to being imported which has no impact on the regional economy): 65% (i.e. low leakage scenario), 50% and 35% (i.e. high leakage scenario) spent locally. For a remote region such as the Southern Gulf catchments, the potential exists for leakage to be higher than this high leakage scenario (i.e. <35% spent locally), resulting in a lower benefit to the local Southern Gulf catchments regional economy; however, when considering the wider region encompassing the urban location of Mount Isa and the rural remainder of the catchments and adjacent regions within north-western Queensland, this range of likely leakage scenarios is probably reasonable. In cases of high leakage, the knock-on benefits would instead occur in the regions supplying the goods and services (a large proportion of which is likely to be from elsewhere in the state). Utilising five possible scales for development capital construction costs together with three possible levels of spend to be made locally resulted in 12 different construction scenarios. Each of these scenarios was processed through the I–O model to estimate the potential regional benefit from the construction phase (including the Type II multiplier effects). The results of this analysis are set out in Table 9-2. The values are the total benefits over the duration of construction, so annual benefits would be split according to the expenditure in each year and would cease once the construction phase was complete. Table 9-2 Regional economic impact estimated by input–output (I–O) analysis for the total construction phase of an irrigated agricultural development based on estimated Type ll multipliers determined from the north-west Queensland I–O models Estimates represent an upper bound, because some assumptions of I–O analysis are violated in the case of such a large public investment in a region where existing economic (non-mining) activity is so low. Leakage to other regions and other countries is accounted for by reducing the proportion of expenditure (and benefits) within the I–O region. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au As can be seen from these results, the proportion of scheme construction costs spent within the region, (indicating how much of the initial exogenous shock is retained within the region rather than being lost in leakage to elsewhere) has a significant impact on the size of the regional economic benefit experienced. If a large proportion of the initial spend leaks from the region, the benefit of the initial construction investment will be less concentrated in the local Southern Gulf catchments economy and would spread to other locations supplying goods and services. The combined direct and indirect impacts on household incomes resulting from each of the scenarios were also estimated. Based on the north-west Queensland I–O model, only 7% of the increased household incomes flows to Indigenous households, despite Indigenous Peoples comprising around 27% of the population of the region. This model clearly indicates that the benefits flow disproportionately towards non-Indigenous households. This reflects the lower level of Indigenous engagement (compared to that of non-Indigenous Peoples) with the economic activity of these regions; this is not unexpected based on findings of previous research. This indicates that if the irrigated agricultural development is to contribute towards the government’s Indigenous Advancement Strategy (NIAA, 2021), and contribute towards achieving the ‘closing the gap’ targets (Australian Government, 2021) then specific interventions are likely to be required to increase Indigenous involvement in the construction phase of the project by specifically seeking to provide employment opportunities to the Indigenous Peoples of the region where possible. Based on the estimated increase in household incomes, the number of direct and indirect jobs created during the construction phase were estimated (Table 9-3). The estimated number of jobs has been presented in total, rather than presenting the additional jobs likely to be created for Indigenous and non-Indigenous workers separately due to the many additional assumptions that would be required for such an analysis (over and above the assumptions on which the I–O analysis are based). Note, however, that Indigenous workers are likely to only fill a small proportion of new jobs created, because only around 7% of additional household incomes is estimated by the I–O models to flow to Indigenous households. Table 9-3 Estimated full-time equivalent (FTE) number of jobs created for the construction phase of an irrigated agricultural development Based on estimates of impact on household incomes calculated from input–output (I–O) analysis (using Type ll multipliers determined from I–O model for north-west Queensland) and average incomes per person, for the construction phase of an irrigated agricultural development. Analyses assume the construction phase and duration of jobs would be within one year: for longer construction periods the annual FTE would be lower but spread over more years. Estimates represent an upper bound because some assumptions of I–O analysis are violated in the case of such a large public investment in a region where existing agricultural activity is so low. Leakage to other regions and other countries is accounted for by reducing the proportion of expenditure (and benefits) within the region. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au As expected, the estimated employment outcomes are closely related to those for impacts on regional economic activity, with a larger number of jobs created when there is assumed to be lower leakage rates and when the initial capital spend is larger. The regional benefits from the construction phase are estimated based on the assumption that the capital funding is an exogenous injection of spending into the region rather than some (or all) of the funding representing a diversion of current spend away from other construction projects within the region towards the new development; that is, the capital funding is treated as new expenditure over and above current activity. The benefits to the region under this assumption would be unaffected by whether the funding was derived from the public sector (federal or state) or private sources, or a combination. Should any of the construction represent a diversion from current regional spend, then the analysis should be considered to be based on the net injection (total spend on new project less current regional spend diverted) rather than gross expenditure to avoid overstatement of regional benefits. Further, the opportunity cost of the capital spend is not incorporated in this analysis, but the best alternate use(s) of the funding should also be evaluated before scarce available funding is committed to the development. 9.2.2 Regional economic benefits during the operational phase (recurrent) For assessing the regional economic benefits arising during the operational (farming) phase of an irrigated agricultural development, analyses used four scenarios as indicators of the possible scales of investment and types of development. These scenarios evaluated the impacts of increases in gross value of agricultural production from new agricultural development of $25, $50, $100 and $200 million/year. At the low end ($25 million/year), this could represent 10,000 ha of new plantation timber, while the high end ($200 million/year) could represent 10,000 ha of mixed broadacre cropping and horticulture (based on farm financial estimates for these crops presented in Section 5.2, with other crop options falling in between the two ends of this range). In each scenario, the additional agricultural output is considered once developments have reached their full potential. The different scales of increased economic output from agriculture, resulting from new water development, are stated net of any contribution the farmers are required to make towards the costs of building off-farm infrastructure. In practice farmers may be charged for the infrastructure development as part of their cost of acquiring a water entitlement and/or ongoing payments for water extraction, and these contributions may be subsidised to some extent by government grants towards the construction. Impacts were quantified in terms of the total increased economic activity (Table 9-4) in the region, followed by analysis based on the associated impact on household incomes and employment (using the approach described above). The multipliers estimated from the I–O analysis that were used to estimate the increased economic activity are summarised in Table 9-5. The estimated impact on household incomes, disaggregated between Indigenous and non-Indigenous households, is shown alongside the estimated increased number of jobs represented by that increased income ( Table 9-6). Note that all results scale linearly as the economic output of each type of agricultural activity increases; likewise, a linear decrease in economic activity would result from a decrease in agricultural activity. As before, estimates were made based upon the regional I–O model for north-west Queensland, which estimated economic impacts from increased activity from within each of three categories of agricultural activity (beef cattle industry; agriculture excluding beef cattle; and aquaculture, forestry and fishing). Table 9-4 Estimated regional economic impact per year resulting from four scales of direct increase in agricultural output (rows) in the Southern Gulf catchments, for the different categories of agricultural activity (columns) using the input–output (I–O) model for north-west Queensland Increases in agricultural output are assumed to be net of the annualised value of contributions towards the construction costs. Estimates are based on Type ll multipliers determined from the I–O model for each year of agricultural production. Estimates represent an upper bound because some assumptions of I–O analysis are violated in the case of such a large public investment in a region where existing agricultural activity is so low. Leakage to other regions and other countries is accounted for by reducing the proportion of expenditure (and benefits) within the region. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 9-5 Type II regional economic multipliers applicable to the ongoing agricultural production phase of the Southern Gulf catchments development Estimates represent an upper bound because some assumptions of input–output (I–O) analysis are violated in the case of such a large public investment in a region where existing agricultural activity is so low. Leakage to other regions and other countries is accounted for by reducing the proportion of expenditure (and benefits) within the region. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Table 9-6 Estimated impact on annual household incomes and full-time equivalent (FTE) jobs within the Southern Gulf catchments resulting from four scales of direct increase in agricultural output (rows) for the various categories of agricultural activity (columns) Increases in agricultural output are assumed to be net of the annualised value of contributions towards the construction costs. Estimates are based on Type ll multipliers determined from two independent input–output (I–O) models for each year of agricultural production. Estimates represent an upper bound because some assumptions of I– O analysis are violated in the case of such a large public investment in a region where existing agricultural activity is so low. Leakage to other regions and other countries is accounted for by reducing the proportion of expenditure (and benefits) within the region. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au When applying the results of this analysis to a new irrigation scheme, based on the estimated increased value of agricultural output, it is important to be aware of all underlying assumptions, as explained previously. For example, the actual outcome may be quite different to that predicted by the analysis if the mix of agricultural activities within the I–O region is changed significantly from that in existence when the original I–O table was derived. Furthermore, the I–O method is generally considered to overestimate economic impacts, so the results are best used for relative comparisons among development options, or for providing an indication of the upper bound of the absolute magnitude of the regional benefit. As can be seen from the estimated regional economic impacts (Table 9-4), based on the model, an irrigation scheme that increases the output of the ‘beef cattle’ industry could have a larger impact on regional economic activity than a scheme that promotes ‘agriculture excluding beef cattle’, while the smallest regional economic benefit would derive from an aquaculture, forestry and fishing focused development. These differences result from the different multipliers estimated for the different types of activities, as set out in Table 9-5. The analysis also estimated increases to household incomes within the region that would result from the exogenous boost in demand (assumed to equal the increased production facilitated by the development) to the agricultural industries using the I–O model. This increase in income was used to estimate the increase in jobs created in the region (directly, and indirectly through production and consumption effects), by dividing the total increase in household incomes by the estimated mean annual incomes in the region (calculated using ABS wage price index data for Queensland and the mean income within Queensland for the year ended June 2018, being the most recent regional data available, as described in Section 9.1.1 above). The disaggregated impact on Indigenous and non-Indigenous household incomes was estimated using the model; these disaggregated income effects are set out in Table 9-6; the same table also reflects the estimated number of jobs (Indigenous and non- Indigenous combined) that could be created directly and indirectly by such developments. Using the model, where around 27% of the population identify as Indigenous, the proportion of household income increase flowing to Indigenous households varies according to agricultural type. A beef cattle based agricultural development would result in 5% of the increase in household incomes flowing to Indigenous households, compared to 1% to 2% for the other two categories (agriculture excluding beef cattle, and aquaculture, forestry and fishing). This is not unexpected, as Indigenous Peoples are known to have been involved in working with cattle on cattle stations across the country since colonisation, and thus have higher levels of involvement within this sector compared to others. It should be noted that a proportion of these jobs are unlikely to be filled by people currently residing within the Southern Gulf catchments as it is unlikely that a sufficient pool of suitable workers is currently available in the catchments. A proportion of the jobs could be filled by people from the wider region, that is, people could migrate from other parts of northern Australia to take up some of these opportunities, however, foreign and domestic migratory workers from outside the region may also take up some of these opportunities. Accordingly, some of the benefits would accrue to people currently outside the catchments, and potentially outside of Australia, which could increase the leakage of benefits from the scheme outside of the region, and potentially, outside of the country. 9.2.3 Summary of estimated regional economic impact of a Southern Gulf catchments irrigated agriculture development While I–O based methods result in imperfect estimates, the approach provides some useful guidance to the likely upper bounds of the regional economic activity and employment opportunities that could result from development within the Southern Gulf catchments region, in both the construction and operational phases. Based on the I-O model, a large agricultural development providing $200 million of ongoing net additional output each year (after subtracting any payments farmers are required to contribute to the capital costs of the development to enable the scheme to be fully self-funded) could provide up to $303 million of regional benefit (with around half of this representing the direct benefit of the new farming) (Table 9-4) and create almost 600 jobs ( Table 9-6) (considering just irrigated cropping). This represents $0.52 of additional benefit over and above the direct benefit of each dollar of new agricultural production generated by such a scheme (Table 9-5). Should the Australian and/or Queensland governments choose to cover part of the costs of the development then the value of additional output will increase by the amount of the subsidy and the total regional economic benefit (direct and indirect) would increase by just over double the amount of that publicly funded contribution. Policy makers would need to consider the benefit generated by such a public investment compared to alternate uses of public funds (the opportunity cost) when determining the amounts and value of public contributions to new developments. In the construction phase, based on the consideration of the results of the I–O model, a medium- scale agricultural development requiring a capital cost of $2 billion could provide a one-off (temporary) regional benefit of $2.1 billion, based on an optimistic estimate of the likely leakage outside the region (with the majority of this representing the direct benefit of the construction work) (Table 9-2), and create about 3800 jobs (Table 9-3). After adjusting for estimated leakage, this represents around $0.11 of additional benefit over and above the direct benefit of each dollar invested in the construction of the scheme. It should be noted that the above approach of summarising regional benefits of both the construction and agricultural phases of the project essentially represent upper-bound estimates for the likely outcomes, and particularly, that the magnitude of regional benefits arising during the construction phase is likely to be small relative to the actual capital cost of a development. Regional benefits, in terms of sustained increases in economic activity, incomes and jobs from new farming, are expected to flow during the operational phase. Part IVConcluding comment Forage crop grown under centre pivot Source: CSIRO–Nathan Dyer 10 The ‘sweet spot’ for northern development The purpose of this report was to provide information on the costs, risks and benefits of new irrigated development in the catchment of the Southern Gulf rivers, at farm to scheme and regional scales, and supply chains beyond. The overall conclusion is that large public dams would be marginal, but on-farm water sources, suitably sited, could provide good prospects for viable new enterprises. There is a range of cropping options that could be suitable, of which the most likely to be profitable (if development costs can be kept low enough) are annual horticulture, cotton, forages and peanut. Sequential cropping systems present opportunities for combining crops that might not be profitably grown alone and/or to generate additional net revenue from the same capital investment. There are many potential cropping sequences that show agronomic potential for matching back-to-back crop requirements with the growing conditions of the Southern Gulf catchments, particularly friable, non-cracking clay soils (Dermosols and Chromosols) and well- draining loamy soils (Kandosols), but these would need to be developed and proven locally. Trafficability constraints and crop tolerance to wet soil conditions on finer-textured clay soils (Vertosols) would make scheduling back-to-back crops in the same season more difficult, so would restrict the choice of crops to those with shorter growing seasons and would likely be opportunistic. The farm-scale performance of cropping systems will be determined by: • finding markets and supply chains that can provide a sufficient price and reliability of demand, while being able to supply those markets at adequate scale and an affordable cost (see Section 2.2 and Chapter 7 of this report) • the skill of farmers and investors in managing the operational and financial complexity of adapting crop mixes and production systems to the environments of the Southern Gulf catchments (including soils, water resources and climates), particularly in managing cashflows and ‘learning’ through the challenging establishment years (see parts II and III of this report) • the nature of water resources in terms of their costs to develop, the volume and reliability of supply, and the timing of when water is available relative to optimal planting windows (particularly for sequential cropping) (see companion technical reports on river modelling calibration (Gibbs et al., 2024surface water storage (Yang et al., 2024), and groundwater characterisation (Raiber et al., 2024)) • the nature of the soil resources in terms of their scale and distribution, their proximity to water sources and supply chains, their farming constraints, crops they can support with viable yields, and their costs to develop; where the best opportunities are supported by the cracking clays (Vertosols) although these soils have poor trafficability in the wet season, and the friable, non- cracking clay soils (Dermosols and Chromosols) and loamy soils (Kandosols) in substantial areas across the catchments (see companion technical reports on digital soil mapping and land suitability (Thomas et al., 2024) and flood modelling (Karim et al., 2024) and Part III of this report). Long supply chains and distant processing facilities have typically put northern Australia agriculture at a competitive disadvantage (relative to southern farming regions). As market, regulatory, infrastructure and other conditions in the Southern Gulf catchments change from those prevailing at the time this report was written, growers would be expected to adapt and respond to opportunities and challenges accordingly. Ultimately the crops (if any) that can be successfully and sustainably grown will have to find sweet spots where investors can simultaneously address all three of the following questions (Stokes et al., 2019) (Figure 10-1; Table 10-1): • Markets: Where is the investor going to sell their produce and how are they going to set up the supply chains to get their products, at low-enough cost, from the Southern Gulf catchments to those who want to buy them? • Production systems: What is the investor going to grow and do they understand how this needs to be grown differently in tropical Australia (and the soils, water resources and climates of the environments of the Southern Gulf catchments specifically) to where they have gained their previous experience? • Competition: Why is it better to grow the chosen product(s) in tropical Australia, relative to alternative options of growing the same product elsewhere, or growing different products in the chosen location? There is a wide variety of potential investors in northern Australia agriculture, each of whom will come with different strengths and blind spots (Stokes et al., 2017, 2023; Webster et al., 2024). Each may initially be drawn by an opportunity in a particularly strong area of competence for one of the three criteria above (be it a new market where they can fill an unmet demand, a crop product with particular promise, or identifying a prospect for gaining a competitive advantage within an industry) but will likely not initially be completely aware of the full scale of the challenge in one of the other areas. Successful investments have typically been able to address all three of the above criteria, while failures have not. Schematic of sweet spot for ag investment \\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\4_S_Gulf\4_Data\3_Economic\SoGSoGWRA-Diagrams.pptx For more information on this figure please contact CSIRO on enquiries@csiro.au Thriving local agricultureSpatial diversificationDry season plantingSequential croppingOveroptimismUnproven production systemsPreservationist attitudesApprovals processesProductionSWEETSPOT Figure 10-1 Viable irrigated agriculture investments in the Southern Gulf catchments require a combination of capturing opportunities and mitigating risks in three critical areas: markets, production systems and competition Adapted from Stokes et al. (2019). Details for each risk and opportunity are expanded in Table 10-1. Table 10-1 Opportunities and risks across three key criteria for the success of irrigated development in the Southern Gulf catchments Adapted from Stokes et al. (2019), which provides details of the methods and supporting literature. These points are further supported by analyses and literature presented in this Assessment. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au This Assessment (including companion reports) has focused primarily on ‘production system’ challenges by filling knowledge gaps on the land and water resources in the Southern Gulf catchments. This report has evaluated the farming options that could be sustainably and profitably developed on that resource base, and has provided additional supporting information for overcoming the competitive disadvantages and market constraints for northern Australia. Widespread expansion of agriculture in the Southern Gulf catchments is unlikely to occur in the near term, except potentially an expansion of the cotton industry if prices remain at historically high levels and if a cotton gin is constructed locally. 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In: Proceedings of ANCID 2006, 16–19 October, Darwin, NT. The Australian National Committee on Irrigation and Drainage. Yeates SJ and Poulton PL (2019) Determining dryland cotton yield potential in the NT: preliminary climate assessment and yield simulation. Report to NT Farmers, Queensland Cotton and the Cotton Research and Development Corporation. CSIRO, Canberra. Yeates SJ, Strickland GR and Grundy PR (2013) Can sustainable cotton production systems be developed for tropical northern Australia? Crop and Pasture Science 64, 1127–1140. PartVAppendices Barramundi fish Appendix A Aquaculture opportunities and viability A.1 Introduction There are considerable opportunities for aquaculture development in northern Australia given its natural advantages of a climate suited to farming valuable tropical species, the large areas identified as suitable for aquaculture, political stability and proximity to large global markets. The main challenges to developing and operating modern and sustainable aquaculture enterprises are regulatory barriers, global cost competitiveness and the remoteness of much of the suitable land area. A comprehensive situational analysis of the aquaculture industry in northern Australia (Cobcroft et al., 2020) identifies key challenges, opportunities and emerging sectors. This appendix draws on a recent assessment of the opportunities for aquaculture in northern Australia (Irvin et al., 2018), summarising: the three most likely candidate species (Section A.2); an overview of production systems (Section A.3); and the financial viability of different types of aquaculture developments (Section A.4). A.2 Candidate species The three species with the most aquaculture potential in the catchments of the Southern Gulf rivers are black tiger prawns (Penaeus monodon), barramundi (Lates calcarifer), and red claw (Cherax quadricarinatus). The first two species are suited to many marine and brackish water environments of northern Australia and have established land-based culture practices and well- established markets for harvested products. Prawns could potentially be cultured in either extensive (low density, low input) or intensive (higher density, higher inputs) pond-based systems in northern Australia, whereas land-based culture of barramundi would likely be intensive. Red claw is a freshwater crayfish that is currently cultured by a much smaller industry than the other two species. Black tiger prawns Black tiger prawns are found naturally at low abundances across the waters of the western Indo- Pacific region, with wild Australian populations making up the southernmost extent of the species. Within Australia, the species is most common in the tropical north, but does occur at lower latitudes. Barramundi Barramundi is the most highly produced and valuable tropical fish species in Australian aquaculture. Barramundi inhabit the tropical north of Australia from the Exmouth Gulf in WA through to the Noosa River on Queensland’s east coast. It is also commonly known as the ‘Asian sea bass’ or ‘giant sea perch’ throughout its natural areas of distribution in the Persian Gulf, the western Indo-Pacific region and southern China (Schipp et al., 2007). The attributes that make barramundi an excellent aquaculture candidate are fast growth (reaching 1 kg or more in 12 months), year-round fingerling availability, well-established production methods, and hardiness (i.e. they have a tolerance to low oxygen levels, high stocking densities and handling, as well as a wide range of temperatures) (Schipp et al., 2007). In addition, barramundi are euryhaline (able to thrive and be cultured in fresh and marine water), but freshwater barramundi can have an earthy flavour. Red claw Red claw is a warm-water crayfish species that inhabits still or slow-moving water bodies. The natural distribution of red claw ranges from the tropical catchments of Queensland and the NT to southern New Guinea. The name ‘red claw’ is derived from the distinctive red markings present on the claws of the male crayfish. The traits of red claw that make them attractive for aquaculture production are: a simple life cycle, which is beneficial in that complex hatchery technology is not required (Jones et al., 1998); their tolerance of low oxygen levels (<2 mg/L), which is beneficial in terms of handling, grading and transport (Masser and Rouse, 1997); their broad thermal tolerance, with optimal growth achievable between 23 and 31 °C; and their ability to remain alive out of the water for extended periods. A.3 Production systems Overview Aquaculture production systems can be broadly classified into extensive, semi-intensive and intensive systems. Intensive systems require high inputs and expect high outputs: they require high capital outlay and have high running costs; they require specially formulated feed and specialised breeding, water quality and biosecurity processes; and they have high production per hectare (in the order of 5,000 to 20,000 kg/ha per crop). Semi-intensive systems involve stocking seed from a hatchery, routine provision of a feed, and monitoring and management of water quality. Production is typically 1000 to 5000 kg/ha per crop. Extensive systems are characterised by low inputs and low outputs: they require less sophisticated management and often require no supplementary feed because the farmed species live on naturally produced feed in open-air ponds. Extensive systems produce about half the volume of global aquaculture production, but there are few commercial operations in Australia. Water salinity and temperature are the key parameters that determine species selection and production potential for any given location. Suboptimal water temperature (even within tolerable limits) will prolong the production season (because of slow growth) and increase the risk of disease, reducing profitability. The primary culture units for land-based farming are purpose-built ponds. Pond structures typically include an intake channel, production pond, discharge channel and a bioremediation pond (Apx Figure A-1). The function of the pond is to be a containment structure, an impermeable layer between the pond water and the local surface water and groundwater. Optimal sites for farms are flat and have sufficient elevation to enable ponds to be completely drained between seasons. It is critical that all ponds and channels can be fully drained during the off (dry-out) season to enable machinery access to sterilise and undertake pond maintenance. For more information on this figure please contact CSIRO on enquiries@csiro.au Apx Figure A-1 Schematic of marine aquaculture farm Most production ponds in Australia are earthen. Soils for earthen ponds should have low permeability and high structural stability. Ponds should be lined if the soils are permeable. Synthetic liners have a higher capital cost but are often used in high-intensity operations, which require high levels of aeration – conditions that would lead to significant erosion in earthen ponds. Farms use aerators (typically electric paddlewheels and aspirators) to help maintain optimal water quality in the pond, provide oxygen, and create a current that consolidates waste into a central sludge pile (while keeping the rest of the pond floor clear). A medium-sized 50-ha prawn farm in Australia uses around 4 GWh annually, with pond aeration accounting for most of an enterprise’s energy use (Paterson and Miller, 2013). Back-up power capacity sufficient to run all the aerators on the farm, usually via a diesel generator, is essential to be able to cope with power failures. Extensive production systems do not require aeration in most cases. Black tiger prawns A typical pond in the Australian black tiger prawn industry would be rectangular, about 1 ha in area and about 1.5 m in depth. The ponds are either wholly earthen, lined on the banks with black plastic and earthen bottoms, or (rarely in Australia) fully lined. Pond grow-out of black tiger prawns typically operates at stocking densities of 25 to 50 individuals per square metre (termed ‘intensive’ in this report). These pond systems are fitted with multiple aeration units (that could double from 8 to 16 units as the biomass of the prawn crop increases) (Mann, 2012). At the start of each prawn crop, pond bottoms are dried, and unwanted sludge from the previous crops is removed. If needed, additional substrate is added. Before filling the ponds, lime is often added to buffer pH, particularly in areas with acid sulfate soils. The ponds are then filled with filtered seawater and left for about 1 week prior to postlarval stocking. Algal blooms in the water are encouraged through addition of organic fertiliser to provide shading for prawns, discourage benthic algal growth, and stimulate growth of plankton as a source of nutrition (QDPIF, 2006). Postlarvae are purchased from hatcheries and grow rapidly into small prawns in the first month after stocking, relying mainly on the natural productivity (zooplankton, copepods and algae) supported by the algal bloom for their nutrition. Approximately 1 month after the prawns are stocked, pellet feed becomes the primary nutrition source. Feed is a major cost of prawn production: around 1.5 kg of feed is required to produce 1 kg of prawns. Prawns typically reach optimal marketable size (30 g) within 6 months. After harvest, prawns are typically processed immediately, with larger farms having their own production facilities that enable grading, cooking, packaging and freezing activities. Effective prawn farm management involves maintaining optimal water quality conditions, which becomes progressively more complex as prawn biomass and the quantity of feed added to the system increase. As prawn biomass increases, so too does the biological oxygen demand required by the microbial population within the pond that is breaking down organic materials. This requires increases in mechanical aeration and water exchanges (either fresh or recycled from a bioremediation pond). In most cases water salinity is not managed, except through seawater exchange, and will increase naturally with evaporation and decrease with rainfall and flooding. Strict regulation of the quality and volume of water that can be discharged means efficient use of water is standard industry practice. Most Australian prawn farms allocate up to 30% of their productive land for water treatment by pre-release containment in settlement systems. Barramundi The main factors that determine productivity of barramundi farms are water temperature, dissolved oxygen levels, effectiveness of waste removal, expertise of farm staff and the overall health of the stock. Barramundi are susceptible to a variety of bacterial, fungal and parasitic organisms. They are at highest risk of disease when exposed to suboptimal water quality conditions (e.g. low oxygen or extreme temperatures). Due to the cost and infrastructure required, many producers elect to purchase barramundi fingerlings from independent hatcheries, moving fish straight into their nursery cycle. Regular size grading is essential during the nursery stage to minimise aggressive and cannibalistic behaviour: size grading helps to prevent mortalities and damage from predation on smaller fish, and it assists with consistent growth. Ponds are typically stocked to a biomass of about 3 kg per 1000 L. Under optimal conditions barramundi can grow to over 1 kg in 12 months and to 3 kg within 2 years (Schipp et al., 2007). The two largest Australian aquafeed manufacturers (located in Brisbane and Hobart) each produce a pellet feed that provides a specific diet promoting efficient growth and feed conversion. The industry relies heavily on these mills to provide a regular supply of high-quality feed. Cost of feed transport would be a major cost to barramundi production in the Southern Gulf catchments. As a carnivorous species, high dietary protein levels, with fishmeal as a primary ingredient, is required for optimal growth. Barramundi typically require between 1.2 and 1.5 kg of pelleted feed for each kilogram of body weight produced. Warm water temperatures in northern Australia enable fish to be stocked in ponds year round. Depending on the intended market, harvested product is processed whole or as fillets and delivered fresh (refrigerated or in ice slurry) or frozen. Smaller niche markets for live barramundi are available for Asian restaurants in some capital cities. Red claw Water temperature and feed availability are the variables that most affect crayfish growth. Red claw are a robust species but are most susceptible to disease (including viruses, fungi, protozoa and bacteria) when conditions in the production pond are suboptimal (Jones, 1995). In tropical regions, mature females can be egg bearing year round. Red claw breed freely in production ponds, so complex hatchery technology (or buying juvenile stock) is not required. However, low fecundity and the associated inability to source high numbers of quality selected broodstock are an impediment to intensive expansion of the industry. Production ponds are earthen lined, rectangular in design and on average 1 ha in size. They slope in depth from 1.2 to 1.8 m. Sheeting is used on the pond edge to keep the red claw in the pond (they tend to migrate) and netting surrounds the pond to protect stock from predators (Jones et al., 2000). At the start of each crop, ponds are prepared (as for black tiger prawns above), then filled with fresh water and left for about 2 weeks before stocking. During this period, algal blooms in the water are encouraged through addition of organic fertiliser. Ponds are then stocked with about 250 females and 100 males that have reached sexual maturity. Natural mating results in the production of around 20,000 advanced juveniles. Red claw are omnivorous, foraging on natural productivity such as microbial biomass associated with decaying plants and animals. Early-stage crayfish rely almost solely on natural pond productivity (phytoplankton and zooplankton) for nutrition. As the crayfish progress through the juvenile stages, the greater part of the diet changes to organic particulates (detritus) on the bottom of the pond. Very small quantities of a commercial feed are also added on a daily basis to assist with the weaning process and provide an energy source for the pond bloom. Providing adequate shelters (net bundles) is essential at this stage to improve survival (Jones, 2007). Approximately 4 months after stocking, the juveniles are harvested and graded by size and sex for stocking in production ponds. Juveniles are stocked in production ponds at 5 to 10 per square metre. Shelters are important during the grow-out stage, with 250/ha recommended. During the grow-out phase, pellet feed becomes an important nutrition source, along with the natural productivity provided by the pond. Current commercial feeds are low cost and provide a nutrition source for natural pond productivity as much as for the crayfish. Most Australian farmers use diets consisting of 25% to 30% protein. Effective farm management involves maintaining water quality conditions within ranges optimal for crayfish growth and survival as pond biomass increases. As with barramundi, management involves increasing aeration and water exchanges, while strictly managing effluent discharges. Red claw are harvested within 6 months of stocking to avoid reproduction in the production pond. At this stage the crayfish will range from 30 and 80 g. Stock are graded by size and sex into groups for market, breeding or further grow-out (Jones, 2007). Estimated water use An average crop of prawns farmed in intensive pond systems (8 t/ha over 150 days) is estimated to require 127 ML of marine water, which equates to 15.9 ML of marine water for each tonne of harvested product (Irvin et al., 2018). For pond culture of barramundi (30 t/ha over 2 years), 562 ML of marine water, or fresh water, is required per crop, equating to 18.7 ML of water for each tonne of harvested fish. For extensive red claw culture (3 t/ha over 300 days), 240 ML of fresh water is required per pond crop, equating to 16 ML of water for each harvested tonne of crayfish (Irvin et al., 2018). A.4 Aquaculture viability This section provides a brief, generic analysis of what would be required for new aquaculture developments in the Southern Gulf catchments to be financially viable. The analyses follow the same approach as those conducted in Irvin et al. (2018) but have been updated. First, indicative costs are provided for a range of four possible aquaculture enterprises that differ in species farmed, scale and intensity of production. The cost structure of the enterprises is based on established tools available from the Queensland Government for assessing the performance of existing or proposed aquaculture businesses (Queensland Government website ). Based on the ranges of indicative capital and operating costs for the four types of enterprises, gross revenue targets that a business would need to attain to be commercially viable are then calculated. Enterprise-level costs for aquaculture development Costs of establishing and running a new aquaculture business are divided here into the initial capital costs of development and ongoing operating costs. The four enterprise types analysed were chosen to portray some of the variation in cost structures between potential development options, not as a like-for-like comparison between different types of aquaculture (Apx Table A-1). Capital costs include all land development costs, construction, and plant and equipment, accounted for in the year production commences. The types of capital development costs are largely similar across the aquaculture options with costs of constructing ponds and buildings dominating the total initial capital investment. Indicative costs were derived from Guy et al. (2014), and consultation with experts familiar with the different types of aquaculture, including updating to December 2023 dollar values (Apx Table A-1). Operating costs cover both overheads, which do not change with output, and variable costs that increase as the yield of produce increases. Fixed overhead costs in aquaculture are a relatively small component of the total costs of production. Overheads consist of costs relating to licensing, approvals and other administration (Apx Table A-1). The remaining operating costs are variable (Apx Table A-1). Feed, labour and electricity typically dominate the variable costs. Aquaculture requires large volumes of feed inputs, and the efficiency with which this feed is converted to marketed produce is a key metric of business performance. Labour costs consist of salaries of permanent staff and casual staff who are employed to cover intensive harvesting and processing activities. Aerators require large amounts of energy, increasing as the biomass of produce in the ponds increase, which accounts for the large costs of electricity. Transport, although a smaller proportional cost, is important because this puts remote locations at a disadvantage relative to aquaculture businesses that are closer to feed suppliers and markets. In addition, transport costs may be higher at times if roads are cut (requiring much more expensive air freight or alternative, longer road routes) or if the closest markets become oversupplied. Packing is the smallest component of variable costs in the breakdown categories used here. Revenue for aquaculture produce typically ranges from $10 to $25/kg (on a harvested mass basis), but prices vary depending on the quality and size classes of harvested animals and how they are processed (e.g. live, fresh, frozen or filleted). Farms are likely to deliver a mix of products targeted to the specifications of the markets they supply. Note that the mass of sold product may be substantially lower than the harvested product (e.g. fish fillets are about half the mass of harvested fish), so prices of sold product may not be directly comparable to the costs of production below (which are on a harvest mass basis) (Apx Table A-1). Apx Table A-1 Indicative capital and operating costs for a range of generic aquaculture development options Costs are provided both per hectare of grow-out pond and per kilogram of harvested produce, although capital costs scale mostly with the area developed and operating costs scale mainly with crop yield at harvest. Capital costs have been converted to an equivalent annualised cost assuming a 10% discount rate and that a quarter of the developed infrastructure was assets with a 15-year life span and the remainder had a 40-year life span. Indicative breakdowns of cost components are provided on a proportional basis. Costs derived from Guy et al. (2014) and adjusted to December 2023 dollar values. For more information on this figure, table or equation please contact CSIRO on enquiries@csiro.au Commercial viability of new aquaculture developments Capital and operating costs differ between different types of aquaculture enterprises (Apx Table A-2), but these costs may differ even more between location (depending on case- specific factors such as remoteness, soil properties, distance to water source and type of power supply). Furthermore, there can be considerable uncertainty in some costs, and prices paid for produce can fluctuate substantially over time. Apx Table A-2 Gross revenue targets required to achieve target internal rates of return (IRRs) for aquaculture developments with different combinations of capital costs and operating costs All values are expressed per hectare of grow-out ponds in the development. Gross revenue is the yield per hectare of pond multiplied by the price received for produce (averaged across products and on a harvest mass basis). Capital costs were converted to an equivalent annualised cost assuming a quarter of the developed infrastructure was assets with a 15-year life span and the remainder had a 40-year life span. Targets would be higher after taking into account risks such as initial learning and market fluctuations. IRR = internal rate of return. OPERATING COSTS ($/ha/y) GROSS REVENUE REQUIRED TO ACHIEVE TARGET IRR ($/ha/y) Capital costs of development ($/ha) 60,000 70,000 80,000 90,000 100,000 110,000 125,000 150,000 175,000 7% target IRR 20,000 25,022 25,859 26,696 27,533 28,371 29,208 30,463 32,556 34,648 50,000 55,022 55,859 56,696 57,533 58,371 59,208 60,463 62,556 64,648 100,000 105,022 105,859 106,696 107,533 108,371 109,208 110,463 112,556 114,648 150,000 155,022 155,859 156,696 157,533 158,371 159,208 160,463 162,556 164,648 200,000 205,022 205,859 206,696 207,533 208,371 209,208 210,463 212,556 214,648 250,000 255,022 255,859 256,696 257,533 258,371 259,208 260,463 262,556 264,648 10% target IRR 20,000 26,574 27,669 28,765 29,861 30,956 32,052 33,695 36,434 39,174 50,000 56,574 57,669 58,765 59,861 60,956 62,052 63,695 66,434 69,174 100,000 106,574 107,669 108,765 109,861 110,956 112,052 113,695 116,434 119,174 150,000 156,574 157,669 158,765 159,861 160,956 162,052 163,695 166,434 169,174 200,000 206,574 207,669 208,765 209,861 210,956 212,052 213,695 216,434 219,174 250,000 256,574 257,669 258,765 259,861 260,956 262,052 263,695 266,434 269,174 14% target IRR 20,000 28,776 30,238 31,701 33,163 34,626 36,089 38,283 41,939 45,596 50,000 58,776 60,238 61,701 63,163 64,626 66,089 68,283 71,939 75,596 100,000 108,776 110,238 111,701 113,163 114,626 116,089 118,283 121,939 125,596 150,000 158,776 160,238 161,701 163,163 164,626 166,089 168,283 171,939 175,596 200,000 208,776 210,238 211,701 213,163 214,626 216,089 218,283 221,939 225,596 250,000 258,776 260,238 261,701 263,163 264,626 266,089 268,283 271,939 275,596 Given the variation among possible aquaculture developments in the Southern Gulf catchments, a generic approach was taken to determine what would be required for new aquaculture enterprises to become commercially viable. The approach used here was to calculate the gross revenue that an enterprise would have to generate each year to achieve a target internal rate of return (IRR) for given operating costs and development costs (both expressed per hectare of grow- out ponds). Capital costs were converted to annualised equivalents on the assumption that developed assets equated to a mix of 25% 15-year assets and 75% assets with a 40-year life span (using a discount rate matching the target IRR). The target gross revenue is the sum of the annual operating costs and the equivalent annualised cost of the infrastructure development (Apx Table A-2). In order for an enterprise to be commercially viable, the volume of produce grown each year multiplied by the sales price of that produce would need to match or exceed the target values provided above. For example, a proposed development with capital costs of $90,000/ha and operating costs of $200,000 per hectare per year would need to generate gross revenue of $213,695 per hectare per year to achieve a target IRR of 10% (Apx Table A-2). If the enterprise received $12/kg for produce (averaged across product types, on a harvest mass basis), then it would need to sustain mean long-term yields of 18 t/ha (= $213,695 per hectare per year ÷ $12/kg × 1 t/1000 kg) from the first harvest. However, if prices were $20/kg, mean long-term yields would require 11 t/ha (= 213,695 per hectare per year ÷ $20/kg × 1 t/1000 kg) for the same $125,000 capital costs per hectare, or only 6 t/ha harvests if the capital costs were lowered to $100,000/ha. Target revenue would be higher after taking into account risks, such as learning and adapting to the particular challenges of a new location and periodic setbacks that could arise from disease, climate variability, changes in market conditions or new legislation. Key messages From this analysis, a number of key points about achieving commercial viability in new aquaculture enterprises are apparent: • Operating costs are very high, and the amount spent each year on inputs can exceed the upfront (year zero) capital cost of development (and the value of the farm assets). This means that the cost of development is a much smaller consideration for achieving profitability than ongoing operations and costs of inputs. • High operating costs also mean that substantial capital reserves are required, beyond the capital costs of development, as there will be large cash outflows for inputs in the start-up years before revenue from harvested product starts to be generated. This is particularly the case for larger size classes of product that require multi-year grow-out periods before harvest. Managing cashflows would therefore be an important consideration at establishment and as yields are subsequently scaled up. • Variable costs dominate the total costs of aquaculture production, so most costs will increase as yield increases. This means that increases in production, by itself, would contribute little to achieving profitability in a new enterprise. What is much more important is increasing production efficiency, such as feed conversion rate or labour efficiency, so inputs per unit of produce are reduced (and profit margins per kilogram are increased). • Small changes in quantities and prices of inputs and produce would have a relatively large impact on net profit margins. These values could differ substantially between different locations (e.g. varying in remoteness, available markets, soils and climate) and can depend on the experience of managers. Even small differences from the indicative values provided above could render an enterprise unprofitable. • Enterprise viability would therefore be very dependent on the specifics of each particular case and how the learning, scaling up and cashflow were managed during the initial establishment years of the enterprise. It would be essential for any new aquaculture development in the Southern Gulf catchments to refine the production system and achieve the required levels of operational efficiency (input costs per kilogram of produce) using just a few ponds before scaling any enterprise. A.5 References Cobcroft J, Bell R, Fitzgerald J, Diedrich A and Jerry D (2020) Northern Australia aquaculture industry situational analysis. Project. A.1.1718119. Cooperative Research Centre for Developing Northern Australia, Townsville. Guy JA, McIlgorm A and Waterman P (2014) Aquaculture in regional Australia: responding to trade externalities – a northern NSW case study. Journal of Economic and Social Policy 16(1), 115. Irvin S, Coman G, Musson D and Doshi A (2018) Aquaculture viability. A technical report to the Australian Government from the CSIRO Northern Australia Water Resource Assessment, part of the National Water Infrastructure Development Fund: Water Resource Assessments. CSIRO, Australia. Jones C (2007) Redclaw Package 2007. Introduction to Redclaw Aquaculture. Queensland Department of Primary Industries and Fisheries, Brisbane. Jones C, Grady J-A and Queensland Department of Primary Industries (2000) Redclaw from harvest to market: a manual of handling procedures. Queensland Department of Primary Industries, Brisbane. Jones CM (1995) Production of juvenile redclaw crayfish, Cherax quadricarinatus (von Martens) (Decapoda, Parastacidae) III. Managed pond production trials. Aquaculture 138(1), 247–255. DOI: 10.1016/0044-8486(95)00067-4 Jones CM, McPhee CP and Ruscoe IM (1998) Breeding redclaw: management and selection of broodstock. QI98016. Queensland Department of Primary Industries, Brisbane. Mann D (2012) Impact of aerator biofouling on farm management, production costs and aerator performance. Mid project report to farmers. Seafood Cooperative Research Centre, Adelaide. Masser M and Rouse B (1997) Australian red claw crayfish. The Alabama Cooperative Extension Service, USA. Paterson B and Miller S (2013) Examining energy use in shrimp farming. Study in Australia keys on aeration and pumping demands. Global Aquaculture Advocate. QDPIF (2006) Australian prawn farming manual: health management for profit. Queensland Department of Primary Industries and Fisheries, Brisbane. Schipp G, Humphrey JD, Bosmans J and NT DPIFM (2007) Northern Territory barramundi farming handbook. NT Department of Primary Industry, Fisheries and Mines, Darwin. Appendix B Mining and petroleum Author: Kaylene Camuti, James Cook University Mining includes extraction of minerals (including coal), petroleum and gas, and quarrying. The Southern Gulf catchments are part of the Queensland North West Minerals Province (Figure 2-11), considered to be one of the world’s most significant producing areas for base and precious metals (Department of Regional Development, Manufacturing and Water, 2021). About 75% of Queensland’s base metal mineral endowment is located in this province; the metal mines currently operating within the Southern Gulf catchments are mainly in the south and drier parts of the area, with the largest mines occurring in and near to Mount Isa (inset map on Apx Figure B-2). The NT section of the Southern Gulf catchments is only briefly reviewed here for the mining and petroleum sector as no mines are currently in operation in this NT part of the Assessment area. Current NT exploration licences and mineral occurrence are shown on Apx Figure B-2 and an overall summary of the NT mining and petroleum industry can be found in the Victoria River Water Resource Assessment technical report on agricultural viability and socio-economics (Webster et al., 2024). The largest industry in Queensland in nominal gross value-added terms was mining – worth $86.5 billion in 2022–23 (Queensland Treasury, 2024). Mining is the largest employer in the Southern Gulf catchments (Table 2-4) and Apx Table B-3 presents employee numbers for mines of various sizes. In 2021 the population of the Mount Isa urban area was just over 18,000 and approximately 30% of the labour force was employed directly in mining in a range of occupations, including management, professional and technical roles, administration and machinery operations (ABS, 2021). Both the mining and petroleum sectors and associated exploration will contribute to the economic future of the Southern Gulf catchments. Although current petroleum exploration licences cover parts of the Southern Gulf catchments there are no operational enterprises in the study area. Apx Figure B-2 Main commodity mineral occurrences and exploration tenements in the Southern Gulf catchments Sources: NT Geological Survey (2023); NT Government (2024h); Geological Survey of Queensland (2024); Queensland Government Open Data Portal (2024b) Apx Table B-3 Indicative numbers for employment in different types of mining operations in the Southern Gulf catchments MINE TYPE NUMBER OF EMPLOYEES AND CONTRACTORS SOURCE Very large base metal mine, and associated processing and refining plants 1000–2000 Glencore (2023a) Mid-sized to large base metal mine 300–600 Evolution Mining (2023), MMG (2024) Mid-sized phosphate mine 200–300 Incitec Pivot (n.d.), Andre and Waterson (2023) Water is central to the mining and petroleum industries, with 10% of all water abstracted in Australia used for industrial purposes (including mining). The main uses for which water is abstracted are agricultural (70%) and urban (20%) (ABS, 2020). Indicative volumes of water consumption by commodity are presented in Apx Table B-5. Lake Moondarra and Lake Julius (Apx Figure B-3), both on the Leichhardt River, were purpose-built to supply the mining and support industries. Other major water storages support mining at mines listed in Apx Table B-6. Water infrastructure associated with mining (small- to large-scale) includes but is not limited to purpose- built dams for water supply, transport and processing; tailings dams; de-watering practices; and hydromining in the case of the New Century mine near Lawn Hill (Sibanye Stillwater, 2024). Apx Figure B-3 Lake Julius on the Leichhardt River provides back-up water supplies to Mount Isa for urban needs as well as for mines in the North West Mineral Province B.1 Discovery and development Mining practices are well established in Australia. Records indicate that before European settlement Indigenous Peoples quarried different types of stone (particularly gurabaan) and trading materials of high importance. Following European settlement were periods of rapid population and industrial growth during the mineral rushes, particularly the gold rushes of the 1850s (Australian Museum, 2024). The first discovery of a petroleum-related product in Australia is attributed to the crew of HMS Beagle in 1839, who described a bituminous material in a water well near the tidal extent of the Victoria River in the NT (Resources Victoria, 2022). The mining and petroleum industries, and associated exploration activities, are major contributors to Australia’s economy through; exports, revenue, taxes, investment and jobs (APPEA, 2023) Mineral exploration has a long history in the Southern Gulf Catchments. As early as 1882 Ernest Henry found copper at Mount Oxide, north of Mount Isa. In February 1923, while on a journey to rediscover a goldfield in the NT, prospector John Campbell Miles sampled dark-coloured and heavy rocks on the banks of the Leichhardt River (Glencore, 2024a; Blainey, 2023). The government assayer in Cloncurry found that they contained up to 78% lead and silver (Glencore, 2024a). Miles pegged a mining lease of 24 ha, attracting more people, and a small tent-town and collection of mining diggings grew, which Miles named Mount Isa (Apx Figure B-4) (Blainey, 2023). On 16 January 1924 Mount Isa Mines Ltd was floated on the Sydney Stock Exchange. Full production began in the 1930s and the first dividend was paid in 1947 (Blainey, 2023). A large drilling campaign by Mount Isa Mines in 1952 resulted in the discovery of extensions of the zinc– lead–silver deposits and a nearby world-class copper deposit (Blainey, 2023). By 1955 Mount Isa Mines had become the largest mining company in Australia, and in the years to follow it developed new mining and smelting technologies (Glencore, 2024a). In December 1962 the Shire of Mount Isa was established, and Mount Isa was declared a city in June 1968 (Queensland Government, 2015). Discovery and development continued 20 km to the north, at Hilton, where Mount Isa Mines geologist Sydney Carter discovered zinc–lead–silver ore bodies in 1947. Drilling over subsequent years discovered high-grade metals continuous at depth and in 1969 Mount Isa Mines began developing the Hilton Mine (Glencore, 2024b). After a period of intermittent development Hilton began production in 1989. Production slowed in 1998 in favour of development of the Hilton North deposit, a further 2 km to the north. Hilton North was renamed the George Fisher Mine and officially opened in 2000 (Glencore, 2024b). In 2003 Mount Isa Mines was purchased by Xstrata, which merged with Glencore in 2013 (Hiscock, 2023). The underground lead mine at Mount Isa closed at the end of 2005 because it was running out of ore (ABC, 2005). In October 2023 Glencore announced that the Mount Isa Mines underground copper operations will close in 2025, as remaining mineral resources are currently not economically viable to mine, and that the copper smelter, George Fisher Mine, zinc–lead concentrator and lead smelter in Mount Isa will continue to operate (Glencore, 2023c). From these early days of near-surface exploration or outcrop investigation the mineral industry in the Southern Gulf catchments has expanded to include a range of commodities and large-scale mining enterprises (Apx Table B-6). New-style geophysical surveys and the increase in commodity demand will see continued growth in exploration. DYER_CSIRO_SOUTHERNGULF_2023_213.jpg ?- Photos Apx Figure B-4 The City of Mount Isa and Mount Isa mine In February 2024 the Australian Government released an updated list of Australia’s critical minerals (Department of Industry, Science and Resources, 2024) to include minerals: • essential to Australia’s modern technologies, economies and national security, specifically the priority technologies set out in the Critical Minerals Strategy 2023–2030 (Department of Industry, Science and Resources, 2023) • for which Australia has geological potential for resources • in demand from strategic international partners • vulnerable to supply chain disruption. The Strategic Materials List, also updated in February 2024, includes minerals: • important for the global transition to net zero and broader strategic applications, specifically the priority technologies set out in the Critical Minerals Strategy • for which Australia has geological potential for resources • in demand from strategic international partners. The supply chains for strategic materials are not currently vulnerable enough for these materials to meet the criteria for the Critical Minerals List (Department of Industry, Science and Resources, 2024). Both the Queensland and NT governments have programs to attract investment in critical mineral exploration and infrastructure. In June 2023 the Queensland Government announced a $254 million investment in growing the critical mineral sector in the state. (Ref 21) The NT Government’s program ‘Resourcing the Territory’ (https://resourcingtheterritory.nt.gov.au) aims to attract and support increased investment in exploration for critical minerals. The program provides high-quality geoscience data to explorers and grant funding to support eligible industry exploration programs (NT Geological Survey, 2023). Critical minerals and strategic materials targeted by recent and current exploration programs in the Southern Gulf catchments include copper, zinc, phosphorus, the rare earth elements and graphite. Apx Table B-4 highlights those that occur in the current Critical Minerals and Strategic Materials lists and Apx Figure B-5 shows forecast growth in global demand for several of Australia’s critical and strategic commodities. Global demand for refined copper has been forecast to rise steadily to 2030 (Apx Figure B-5). A 2021 report by the Minerals Council of Australia notes that drivers of demand include the shift towards zero-emissions energy sources, increased spending on consumer electronics in emerging markets, higher urbanisation rates and growth in the use of electric vehicles (Minerals Council of Australia, 2020). The Minerals Council of Australia reports that the outlook for zinc is linked to growth in galvanised steel products, with global demand forecast to rise gradually to 2030 (Apx Figure B-5) (Minerals Council of Australia, 2020). A potential significant future use may be in zinc-based batteries, which are being offered as alternatives to lithium batteries for grid storage (Crownhart, 2023). Phosphorus was added to Australia’s List of Strategic Materials in December 2023 (Department of Industry, Science and Resources, 2024). Phosphate is a natural source of elemental phosphorus, and phosphate deposits are the main source of phosphorus (ICL, 2022). Traditionally, phosphate has been mined as an ingredient for fertilisers, and it is in increasing demand as a component of lithium iron–phosphate batteries for electric vehicles. The demand for rare earth elements, a group comprising 17 metals, has developed with technological advances. The growing importance of these elements in many medical, industrial and strategic applications is because of their unique catalytic, metallurgical, nuclear, electrical, magnetic and luminescent properties. Applications for rare earth elements include magnets and super magnets, motors, metal alloys, electronic and computing equipment, batteries, catalytic converters, petroleum refining, medical imaging, colouring agents in glass and ceramics, phosphors, lasers and special glass (Geoscience Australia, 2023). The demand for the rare earth element neodymium, used for example in permanent magnets for offshore wind turbines, has been projected to increase by between 73% and 113% from 2020 to 2030 (Apx Figure B-5) (Minerals Council of Australia and Commodity Insights, 2020; International Energy Agency, 2022). The demand for graphite is partly driven by the market for electric vehicle and energy storage batteries. Forecasts for graphite include projections of a doubling in graphite supply over the next decade but predict a deficit in 2025 due to demand from the electric vehicle market (Sun, 2023). Within the Southern Gulf catchments there has been local exploration activity focused on identifying graphite resources (Lithium Energy, 2023). Apx Table B-4 Critical mineral status and strategic material status for commodities identified as mineral occurrences in the Southern Gulf catchments, and examples of metals targeted during exploration activities COMMODITY CURRENTLY IN PRODUCTION CRITICAL MINERAL STATUS† STRATEGIC MATERIAL STATUS† Antimony‡ Y Barite Beryllium Y Bismuth‡ Y Cadmium‡ Cobalt Y Copper* Y Y Gold Graphite* Y Indium‡* Y Iron ore Lead Y Manganese* Y Mica Molybdenum‡* Y Nickel‡* Y Phosphate* Y Rare earth elements‡§* Y Silica* Y Silver Y Sulfur‡ Y Tantalum* Y Tin* Y Tellurium‡* Y Tungsten* Y Uranium Vanadium‡* Y Zinc* Y Y Other Building stone Limestone Y Quarry rock Y †Australian Government Department of Industry, Science and Resources. Australia’s Critical Minerals List and Strategic Materials List, 20 February 2024 (Department of Industry, Science and Resources, 2024). ‡Minor associated commodity from Mineral Occurrence Database (MODAT), NT Geological Survey Database (MODAT, 2024) and/or Mineral Occurrence Database (MINOCC), Geological Survey of Queensland (MINOCC, 2024). §Rare earth elements identified as exploration targets in 2023 (Red Metal, 2024). *Main commodity from the Mineral Occurrence (MINOCC) database, Geological Survey of Queensland Mineral Occurrence Database, and/or Mineral Occurrence Database (MODAT), NT Geological Survey Database (NT Geological Survey, 2023) Apx Figure B-5 Forecast global growth in consumption for selected critical minerals and strategic materials Neodymium consumption data are for 2020 rather than 2019, and 2030 data are from the lower end of the forecast range of 54 kt to 66 kt. Sources: Copper, zinc, nickel, uranium, neodymium: 29 Metals (2024); Cobalt: Crane, (2022) B.2 Water use and mining Water is used by the minerals industry for many purposes (Prosser et al., 2011), which can include: • transport of ore and waste in slurries and suspension • separation of minerals by chemical or physical processes • cooling systems for power generation • dust suppression • washing equipment • drinking water for areas that house mining staff. Water is also extracted or ‘used’ during de-watering at mines that extend below the water level, such as Century Zinc Mine. Petroleum companies, which use relatively small volumes of water, produce water as a by-product of extraction. Water extracted during de-watering or as a by- product of petroleum extraction must be safely discharged and may need treatment. Water consumption at mining operations is highly variable. The variations are due to a range of factors including different mining methods, ore types, ore grades, processing treatments and different definitions of water usage. The key variables that influence direct water consumption for metal production processes are the grade of the ore being processed, the tailings solids density and the rate of re-use or recycling within concentration facilities. The processing of mineral ores to produce metal concentrates is usually carried out at the site of the mining operation. The overall water balance on a site is highly dependent on climate conditions, which affect water availability and inflows into the site, and the ability to re-use and recycle water within process facilities (Northey and Haque, 2013). The water consumption values in Apx Table B-5 are from a dataset compiled from an extensive global literature review by Meissner (2021), which noted the wide variation of water consumption values reported for many commodities. The dataset includes minimum and maximum values as well as calculated average specific water consumption values/tonne of metal equivalent in the concentrates or refined metals (Meissner, 2021). Apx Table B-5 Global water consumption in the mining and refining of selected metals PROCESSING STAGE MEAN WATER CONSUMPTION (m3/tonne of metal) RANGE OF WATER CONSUMPTION (m3/tonne of metal) Copper concentrate† 43.235 9.673–99.550 Gold metal‡ 265,861 79,949–477,000 Lead concentrate† 6.597 0.528–11.754 Manganese concentrate† 1.404 1.390–1.410 Palladium metal‡ 210,713 56,779–327,874 Platinum metal‡ 313,496 169,968–487,876 Uranium concentrate (U3O8)† 2746 46.2–8,207 Zinc concentrate† 11.93 11.07–24.65 †Metal concentrates are typically produced at the site where the ore is mined. ‡Includes mining, smelting and refining of pure metals, assuming mining and processing are all located within a single region or separate regions but with similar water characteristics. Source: Meissner (2021) Because water is typically a very small fraction of total input cost, and mining produces high-value products, mining enterprises usually develop their own water supplies, which are often regulated separately to the water entitlement system (Prosser et al., 2011). In the Southern Gulf catchments, however, the concentration of mining and industrial activity resulted in sufficiently high water demand for the construction of large purpose-built reservoirs, including the privately funded Leichhardt Dam (Lake Moondarra) and Julius Dam (Lake Julius, now owned by SunWater). Data on water use by mining in the Southern Gulf catchments are difficult to obtain. As described in the companion technical report on river model scenario analysis (Gibbs et al., 2024), water use from Lake Julius between 2017–18 and 2012–22 was estimated to range from 5 to 14 GL/year, and from Lake Moondarra from 14 to 17 GL/year. Because these quantities represent a relatively modest proportion of the total supplemented water entitlements, there is scope for existing water storages, including Lake Mary Kathleen (12 GL capacity), which is only used for recreation, to support the expansion of mining activity in the Mount Isa region. Regulatory instruments for water development are briefly discussed in Section B.4. B.3 Current Southern Gulf catchments setting Mineral occurrences for a wide range of commodities have been identified in the Southern Gulf catchments. As shown in Apx Figure B-2, approximately 68% of the Southern Gulf catchments is covered by mineral or petroleum exploration licences; the highest proportion occur in the Leichhardt catchment, in which 79% is covered by mineral exploration licences. Occurrences are recorded in mineral occurrence databases maintained by the Geological Survey of Queensland and the NT Geological Survey Database (Queensland Government Open Data Portal, 2024a; NT Geological Survey, 2023). Most of the mining operations in the catchments are involved in the mining of copper, zinc, lead and silver. Data for contained reserves and resources in several of the main deposits are included in Apx Table B-6. Mount Isa region is currently in a period of transition. In 2005 the underground lead mine at Mount Isa closed due to a lack of ore (ABC, 2005), and the Mount Isa Mines underground copper operations are scheduled to cease in 2025 as the remaining mineral resources are deemed economically unviable. These include the underground copper mines Enterprise, X41 and Black Rock. The Lady Loretta zinc mine, a fly-in, fly-out operation 140 km north-west of Mount Isa, is also slated to close in 2025 (Glencore, 2023a). Despite these closures, the global consumptions of copper, zinc and nickel are projected to increase from about 24, 14 and 2 million tonnes in 2019, respectively, to 31, 15 and 4 million tonnes in 2030. Several petroleum exploration bores have been drilled within the catchments. Twenty petroleum exploration bores were drilled on Mornington Island between 1959 and 1961; no hydrocarbons were reported and the holes were plugged and abandoned. Thirteen wells were drilled on the mainland between 1959 and 2013. Gas was reported in three of the wells. Eleven of the holes are reported to have been plugged and abandoned or suspended and capped; two wells are reported to be current water bores (Queensland Government Open Data Portal, 2024a). One dry exploration petroleum well was drilled in 1992 in the NT, close to the western margin of the catchments. The hole is reported to be plugged and abandoned (NT Government, 2024h). Copper There are several copper mining operations in the catchments, including underground operations at Mount Isa and Capricorn Copper in the upper Gunpowder Creek subcatchment, and open-cut mining of deposits at the Lady Annie mine (Glencore, 2023a; 29Metals, 2022; MDO, 2024; Austral Resources, 2024). Zinc, lead and silver The largest operating zinc–lead–silver mines in the catchments are the George Fisher and Lady Loretta mines (Glencore, 2024b; Glencore, 2022). Zinc is also being recovered by re-treatment of tailings at the New Century zinc deposit (Sibanye Stillwater, 2024). The Dugald River zinc–lead–silver deposit, about 90 km north-east of Mount Isa, is just outside the eastern margin of the Southern Gulf catchments. The mine water supply is drawn from a dam located on a minor creek that flows into Cabbage Tree Creek and then into the Leichhardt River. A backup water supply is supplied from Lake Julius. The tenements associated with the Dugald River mining operation partially occur in the eastern margin of the Southern Gulf catchments, so this deposit is included in Apx Table B-6. Uranium Uranium occurrences are in both the south and north-west of the catchments, in both the NT and Queensland (Apx Figure B-2). There are no operating uranium mines. In Queensland it is government policy not to grant mining leases for uranium, although applications may still be made for mineral development licences or exploration permits for uranium (Queensland Department of Resources, 2021). Uranium mining is permitted in the NT (NT Government, 2024i). Uranium exploration is currently being conducted in the catchments. Phosphate and phosphorus Both the NT and Queensland have phosphate occurrences, with a concentration around Lawn Hill and the Gunpowder localities (Apx Figure B-2). Mining at the Paradise South deposit, about 140 km north-west of Mount Isa, is scheduled to start in 2024 (Andre and Waterson, 2023) with the Paradise North operation to follow. Apx Table B-6 Resource and reserve data for several major deposits in and on the margins of the Southern Gulf catchments MINE TONNAGE million t COMMODITY COMMODITY % COMMODITY g per t LIFE OF MINE SOURCE Zinc Lead Silver George Fisher North Mine† (underground) To 2036 Glencore, 2023b, c Measured and Indicated Resources 2023 164 8.92 3.34 54 Total Ore Reserves 2023 45 6.84 3.31 54 George Fisher South Mine† (underground) To 2036 Glencore, 2023b, c Measured and Indicated Resources 2023 55 8.32 5.02 110 Total Ore Reserves 2023 12.9 6.11 4.76 110 Lady Loretta† (underground) To 2025 Glencore, 2023b, c Measured and Indicated Resources 2023 5.1 11.29 2.48 54 Total Ore Reserves 2023 3.5 10.19 2.22 43 Dugald River† (underground) ≥20 years MMG, 2023, 2024 Measured, Indicated and Inferred Resources 2023 57 11.7 1.6 23 Proved and Probable Reserves 2023 20 10.8 1.7 40 New Century‡ (tailings and exploration) To 2027 Sibanye Stillwater, 2023 Measured and Indicated Resources 2022 2.0 5.6 na na Proved and Probable Reserves 2022 6.8 3.0 na na Copper Silver Mount Isa Copper† (open-cut and underground) To 2025 Glencore, 2023b, c Measured and Indicated Resources 2023 156 1.70 na Total Ore Reserves 2023 6.5 1.95 na MINE TONNAGE million t COMMODITY COMMODITY % COMMODITY g per t LIFE OF MINE SOURCE Capricorn Copper† (underground) ≥2034 29Metals, 2022, 2024 Measured, Indicated and Inferred Resources 2023 64.8 1.8 9 Proved and Probable Reserves 2023 19 1.7 12 Phosphate Paradise South Phosphate§ (open-cut) ≥20 years Andre and Waterson, 2023 Measured, Indicated and Inferred Resources (estimated total deposit) 436.5 9.4 Proven and Probable Reserves (estimated total deposit) 198.5 12.7 †Resources and reserves reported in accordance with the 2012 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves (Glencore, 2023b; Joint Ore Reserves Committee, 2012). ‡Resources and reserves reported in accordance with the 2016 edition of The South African code for the reporting of exploration results, mineral resources and mineral reserves (SAMREC, 2016) and subpart 1300 under Regulation S-K of the US Securities Act of 1933 (Sibanye Stillwater, 2023). §Resources and reserves reported in accordance with the 2004 edition of the JORC Code (Joint Ore Reserves Committee, 2004). *The Dugald River mining operations occur outside the Southern Gulf catchments boundary although the tenements associated with the Dugald River project partially occur in the Southern Gulf catchments and the mine water supply is drawn from a purpose-built dam located inside the Leichhardt River catchment with backup water supplied from Lake Julius. ††na = not applicable. B.4 Regulatory frameworks and reforms Both the NT and Queensland governments’ aims of achieving economic, social and environmental goals through development have regulatory mechanisms in place for such developments. Regulation covers many aspects of proposed developments from clearing native vegetation, water access and building approvals to ongoing environmental monitoring and reporting obligations. An overview of regulatory instruments applicable to the mining and petroleum industries relating to water development and the environment are presented in the companion technical report on regulatory requirements for land and water development (Speed and Vanderbyl, 2024) and water planning arrangements (Vanderbyl, 2024). Following are additional regulatory processes. Water development Several aspects of mining activities can affect surface and groundwater resources (Office of the Queensland Mine Rehabilitation Commissioner, 2022) including: • permanent or temporary diversion of waterways or overland flow • construction of dams or weirs for storage of raw or mine-affected water • de-watering of aquifers during mining, and long-term rebound after mining • capture and release of mine-affected water from a mine lease area. Interference with surface and groundwater, such as in river impoundments, stream diversion and groundwater extraction for de-watering mine pits, may require a licence under the Queensland Water Act 2000, which establishes the underground water management framework. A key part of the framework is the requirement for resource tenement holders to prepare an underground water impact report. A major role of this report is to predict likely groundwater impacts in the short- and long term. One purpose of these predictions is to ensure that resource tenement holders enter into “make good” agreements with bore owners before adverse impacts on bores. Under the Water Act, a resource tenement holder is obliged to ensure that a bore is properly monitored and, where necessary, that any impairments caused by a resource operation are ‘made good’ (Queensland Government, 2024a). In Queensland, petroleum exploration and extraction activities are regulated by the Petroleum and Gas (Production and Safety) Act 2004, the Petroleum Act 1923 and the Petroleum (Submerged Lands) Act 1982 (Queensland Department of Environment, Science and Innovation, 2024a). Applications for an environmental authority (EA) for petroleum activities must address the risks and impacts of activities, and document plans to mitigate and manage these. These include water sources and quality, the quantity to be used for the activities, environmental impact of any discharge and possible impacts on groundwater quality (Queensland Department of Environment, Science and Innovation, 2024a). Environmental reforms In November 2023, following a period of consultation and feedback, (via: public consultation; individual members of the public; environment groups; mining companies; industry associations; land councils; special interest groups: https://haveyoursay.nt.gov.au/environmental-reforms) the NT Government passed reforms to the Northern Territory Environment Protection Act 2019 (NT Government, 2024b). The reforms aim to improve the environmental management of mining activities and introduce a risk-based licensing system, extend compliance and enforcement powers under the Environment Protection Act, and consolidate environmental impact management under one licence (NT Government, 2023). Relevant guidance material is being updated and amendments commenced in early March 2024 (NT Government, 2024b). Under the current system an exploration, mining or extractive activity that could have a significant impact on the environment may need to undergo an environmental impact assessment (EIA) through the NT Environment Protection Authority (NT EPA) (NT Government, 2024a). An EIA must address the NT EPA environmental factors and objectives relevant to the proposed activity. These are classified under five themes: land, water, sea, air and people (NT Environment Protection Authority, 2021). The factors to be considered when addressing impacts on water are hydrological processes, inland water environmental quality and aquatic ecosystems (NT Environment Protection Authority, 2022). In Queensland an EA is required for an environmentally relevant activity (ERA) (Queensland Government, 2024b). Mining, mineral processing and mine rehabilitation require a granted mining lease. Mining is considered an ERA so a tenement holder also requires an EA. An EA stipulates conditions to manage potential impacts to waters such as from the release of mine-affected water, impacts to groundwater and from waterway diversions (Office of the Queensland Mine Rehabilitation Commissioner, 2022). The holder of an EA for an exploration or mineral development licence has obligations related to water management, including management of erosion of disturbed areas and of the spillage of contaminants (Queensland Department of Environment, Science and Innovation, 2024b) In Queensland, activities that meet the Small Scale Mining Code eligibility criteria do not require an EA but are subject to conditions under the Environmental Protection Regulation 2019 (Office of the Queensland Parliamentary Counsel, 2019), and they cannot occur in a watercourse or riverine area (Queensland Government, 2024c; Queensland Department of Environment, Science and Innovation, 2024c;). These conditions can include water management issues, including the safety and water quality of dams, and management of drill-holes and water bores (Queensland Department of Environment, Science and Innovation, 2024c). Legacy or abandoned mines The NT Government considers legacy mines to be areas where mining activities have occurred but there is no financial security to cover costs associated with site rehabilitation (NT Government, 2024c, 2024f). Sites in Queensland are classified as abandoned when a mining tenure no longer exists (Queensland Government, 2021b). Both the Queensland and the NT governments have programs to manage impacts at legacy or abandoned mines. In Queensland the Abandoned Mine Lands Program (AMLP) manages legacy mining impacts at abandoned mine sites across Queensland, including active remediation as well as care and maintenance programs (Queensland Government, 2024d). As part of the NT Government’s legacy mines and remediation projects, mining operators in the NT pay an annual levy to support a Mining Remediation Fund to address the impacts of legacy mines (NT Government, 2024d, 2024e). In October 2023 the NT Government introduced the Legacy Mines Remediation Bill 2023 to provide a new regulatory framework for the Mining Remediation Fund (NT Government, 2024b). Within the Southern Gulf catchments two sites are currently in the legacy or abandoned mines programs: Sandy Flat in the NT and Mount Oxide in Queensland (Queensland Government, 2021a). Copper mining at Mount Oxide occurred sporadically from 1927 to 1982. The Queensland AMLP Mount Oxide remediation project has included works to reduce acid drainage, monitor groundwater and upgrade water management infrastructure; it will continue with water monitoring (Queensland Government, 2021a). The copper deposits at Sandy Flat (site of the former Redbank Mine) were worked intermittently from 1916 to 1996. Several studies have been carried out on the site to assist with remediation planning, including groundwater and surface water modelling, surface and groundwater sampling, and mine waste characterisation (NT Department of Industry, Tourism and Trade, 2023). The NT Government Small Mines Safety Program addresses risks to public safety from early mines. The impacts of these small mines are commonly associated with mine workings or open shafts (NT Government, 2024g). B.5 References 29Metals (2022) Capricorn Copper. Viewed 24 February 2024, Hyperlink to: Capricorn Copper . 29Metals (2024) Mineral resources and ore reserves. Viewed 24 February 2024 Hyperlink to: Mineral resources and ore reserves . ABC (8 September 2005) Xstrada lead mine to close in December. Australian Broadcasting Corporation. Viewed 17 February 2024, Hyperlink to: Xstrada lead mine to close in December . ABS (Australian Bureau of Statistics) (2020) 4610.0 – Water account, Australia, 2016–17. Viewed 15 July 2024, https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4610.02016- 17?OpenDocument. ABS (Australian Bureau of Statistics) (2021) Mount Isa – Census Community Profiles, Statistical Areas Level 2 – Working Population Profile XL. Viewed 18 February 2024, https://abs.gov.au/census/find-census-data/community-profiles/2021/315021405. André J and Waterson L (13 October 2023) North West Phosphate begins mining Paradise South in outback Queensland amid global demand for fertiliser, renewables. ABC North West Queensland. Viewed 23 February 2024, Hyperlink to: North West Phosphate begins mining Paradise South in outback Queensland amid global demand for fertiliser, renewables . APPEA (Australian Petroleum Production & Exploration Association) (2023) Energy security and decarbonisation – Securing Australia’s competitive advantage. Federal Budget 2022/2023 submission. Viewed 15 July 2024, https://treasury.gov.au/sites/default/files/2022- 03/258735_australian_petroleum_production_and_exploration_association.pdf. Austral Resources (2024) Lady Annie Project. Viewed 23 February 2024, https://www.australres.com/our-projects/lady-annie-project/. Australian Museum (2024) Mining in Australia. Viewed 15 July 2024, https://australian.museum/publications/minerals/minerals-from-australia/#page-section- mining-australia. Blainey G (2023) The man who made Mt Isa, Weekend Australian. Viewed 17 February 2023, https://www.theaustralian.com.au/inquirer/john-campbell-miles-the-man-who-made-mt- isa/news-story/9aca8df6e21b0b1e33c57837dc5bb4e7. Crane J (2022) The Cobalt Market 2022-2030F. Cobalt Blue Holdings, Sydney. Viewed 22 February 2024, https://cobaltblueholdings.com/assets/resources/The-Cobalt-Market_Apr-22.pdf. Crownhart C (2023) Zinc batteries that offer an alternative to lithium just got a big boost. MIT Technology Review. Viewed 3 March 2024, https://www.technologyreview.com/2023/09/06/1079123/zinc-batteries-boost-eos. Department of Industry, Science and Resources (2023) Critical Minerals Strategy 2023–2030. Australian Government, Canberra. Department of Industry, Science and Resources (2024) Australia’s Critical Minerals List and Strategic Minerals List, February 2024 update. Viewed 18 February 2024, https://www.industry.gov.au/publications/australias-critical-minerals-list-and-strategic- materials-list. Department of Regional Development, Manufacturing and Water (2021) North West Queensland. Viewed 18 February 2024, https://www.rdmw.qld.gov.au/regional-development/our- regions/north-west-queensland. Evolution Mining (2023) Fact Sheet FY23 – Ernest Henry operation. Viewed 23 February 2024, Hyperlink to: Fact Sheet FY23 – Ernest Henry operation . Geological Survey of Queensland (2024) Mineral Occurrence Database (MINOCC). Queensland Government. 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